Active military service can pose challenges during tax filing, especially for deployed or intensely training service members. The MilTax program, administered by the Department of Defense, aims to alleviate these challenges by providing free tax return preparation and e-filing software to all military members and certain veterans, without any income restrictions. This service covers federal tax returns as well as up to three state income tax returns per qualified user.
Additionally, many military bases offer free tax preparation and filing assistance during the tax season, and some extend this service beyond the April deadline. Service members are encouraged to contact their installation's legal office for further details.
Another valuable resource is IRS Publication 3, Armed Forces' Tax Guide, a comprehensive booklet offering essential information and tips to help service members and their families maximize tax benefits permitted by law.
Key benefits for military personnel include:
- Combat pay, which may be partially or fully tax-free. Those serving in support of a combat zone or in designated hazardous duty areas may qualify for this exclusion. Additionally, U.S. citizens or resident aliens working as contractors or employees supporting U.S. armed forces in combat zones might qualify for the foreign earned income exclusion.
- Military members serving in combat zones or contingency operations outside the U.S. can generally postpone most tax deadlines. Eligible individuals can receive automatic extensions for filing and paying taxes.
- The Earned Income Tax Credit (EITC) can be substantial, reaching up to $6,935 for the 2022 tax year. Service members with low to moderate incomes who receive nontaxable combat pay can use a special computation method that may increase their EITC, potentially reducing their tax liability or increasing their refund.
- Dependent care assistance programs for military personnel are considered excludable benefits and are not included in the military member's income.
- Active-duty members of the armed forces may deduct unreimbursed moving expenses if the move was due to a military order for a permanent change of station. Allowances paid for such moves are generally not taxable.
These resources and benefits are designed to support military members in managing their tax obligations effectively and taking advantage of available tax benefits. If you or your spouse are serving in the military and want more information on resources available to members of our armed forces, please contact a ShindelRock tax professional.
