To save money, maximize your deductions, and have an overall easier time with preparing your federal tax returns, here are six military-related tax considerations.
1. Know your eligibility
Military service members qualify for certain tax benefits, deductions, and other advantageous tax treatment for certain life changes and financial situations that go with being a member of the U.S. Armed Forces. If you are a member (commissioned officer, warrant officer, or enlisted personnel) of any of the five-armed service military branches, or the National Guard and reserves, you can qualify for military tax benefits.
Other people who are not members of the military, but who are members of uniformed service organizations, may be eligible Opens in new window for military tax benefits. Members of support organizations who work in a combat zone such as contractors, civilian employees, Red Cross members, or accredited news media personnel may be eligible for a tax extension.
2. Qualify for combat-related tax benefits
If you have been deployed to a combat zone, you can claim certain combat zone tax benefits. The current IRS-recognized combat zones Opens in new window include:
- Afghanistan and other countries certified for combat zone benefits due to their direct support of military operations in Afghanistan, including Djibouti, Jordan, Kyrgyzstan, Pakistan, Somalia, Syria, Tajikistan, Uzbekistan, and Yemen
- Arabian Peninsula Area: Includes the total land areas of Bahrain, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, along with the Gulf of Aden, the Gulf of Oman, the Persian Gulf, the Red Sea, and part of the Arabian Sea.
- Kosovo Area: Includes Albania, Kosovo, Serbia/Montenegro, the Adriatic Sea, and part of the Lonian Sea
- Sinai Peninsula: This is a new qualifying combat zone that was added as part of the Tax Cuts and Jobs Act (TCJA) enacted in December 2017.
In order to qualify for combat-related tax benefits, military service members must also meet one of the following three options as outlined by the IRS, depending on the circumstances of your service and special pay:
- Option 1: Service in an active combat area as designated by Executive Order,
- Option 2: Service in a support area as designated by the Department of Defense in direct sustainment of military operations in the combat zone
- Option 3: Service in a statutorily designated Qualified Hazardous Duty Area
In addition, to qualify for this tax benefit, service members must receive special pay for duty subject to hostile fire or imminent danger as certified by the Department of Defense.
Military members in a combat zone can qualify for a deadline extension on filing and paying their taxes, according to the IRS. The deadline is extended Opens in new window for the period of service in a combat zone, plus 180 days after the last day in the combat zone. In case you are going through an IRS audit, enforced collection of back taxes, or other compliance actions, you can contact the IRS Opens in new window and have these actions suspended until 180 days after you have returned from the combat zone.