Uncle Sam recognizes the sacrifice of Military Personnel
As a member of the US Armed Forces, a lot rests on your shoulders. However, to lighten the load a little bit, you may be eligible for some special tax breaks. Some of them require combat service time, but there are some available to non-combat military, Reservists, and Guard as well. Here are a few of the more notable tips to keep in mind:
Deadline Extensions
While serving our country, the last thing you want to think about is filing your tax return. Many members of the military can obtain extensions of important tax deadlines, including paying taxes and making contributions to IRAs. Sometimes this eligibility extends to other individuals in combat zones, such as members of the Red Cross and the Merchant Marine.
Freedom from Taxes
Generally, gross income does not include any “qualified military benefit,” which includes a long list of items, such as qualifying educational assistance, housing allowances, medical benefits, and veterans’ benefits.
In addition, if you serve in a combat zone as an enlisted service member or as a warrant officer for any part of a month, all of your military income for that month is exempt from federal taxes. Note, however, that combat pay is generally subject to both Social Security and Medicare taxes. Combat pay is also free from state taxes, in Oklahoma.
Opportunity for Additional Savings
Tax-free pay can provide a great opportunity to save extra money or reduce debt. In fact, IRS rules allow tax-free combat pay to be used for contributions to an IRA. Since your IRA can grow tax-deferred until you withdraw the money, contributing more today can provide a real savings boost over the years.
Your combat-zone service also entitles you to a special perk within your federal Thrift Savings Plan. While annual contributions are normally limited to $17,500, you may up to $51,000 when serving in a combat zone. The dollars that go into your TSP tax-free also come out tax-free – though you will owe tax on any earnings you make on those dollars.
Deduction for Uniforms
Whether Active Duty or Reservist; if you buy uniforms and do not receive a uniform allowance, you can deduct the cost of certain uniforms that you can’t wear while off duty. This includes the cost and upkeep of uniforms, insignia of rank, corps devices, epaulets, aiguillettes, and swords.
Moving Expenses
The frequent moves often required of military families can quickly become a financial burden. However, these expenses are easier to deduct if the move is due to a permanent change of station. The “reasonable unreimbursed expenses” as a result of a PCS move, do not have to meet the tests and can be deducted.
These are just a few of the many tax breaks afforded military personnel and their families. Sometimes the details can be tough to wade through, but we can help. Call our office for an appointment to talk with us about any questions you have on these, or any other tax deductions.
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