Military

Several common and complex tax provisions contain special favorable provisions for members of the U.S. Armed Forces



Filing:

  • Members meeting certain requirements are allowed additional time to file their income tax returns and conduct other tax-related activities
  • Same-sex marriages and the impact post-DOMA on military

Income:

  • Members receive many different types of pay and allowances. Some are included in gross income while others are excluded
  • Members serving in an area designated or treated as a combat zone are granted special tax benefits
  • The foreign source income exclusion does not apply to the wages and salaries of military and civilian employees of the U.S. government. However, it may apply to other foreign income earned by military personnel or their spouses
  • The tax-exempt status of certain military disability pensions

Adjustments to income:

  • Certain members of a reserve component may be allowed to deduct travel expenses as an adjustment to income
  • Special rules apply to some members regarding IRA contributions, distributions and repayments
  • The time and distance tests for deductible moving expense are not required for members who move due to a permanent change of station

Tax Credits:

  • Members can elect to have their nontaxable combat pay included in earned income for the earned income credit (EIC) computation, which may increase or decrease the EIC
  • Temporary absences for military service count as time lived at home for the child tax credit residency test
  • A tax liability can be forgiven or refunded for certain members who die while in active service or as a result of wounds or injuries received while an active member

Capital gain exclusion:

  • To exclude gain on a home sale, a member called to active duty away from home may elect to suspend the five-year ownership and use test for up to ten years while away on duty