The Tax Benefits for Deployed Service Members
Being a deployed service member comes with myriad hardships, including distance from family members, the imminent possibility of harm and the lack of creature comforts. Uncle Sam knows that, which is why he offers certain tax benefits for deployed service members. Knowing what those tax benefits are will make filling out your next tax return easier and ensure a hefty refund.
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Combat Zone Exclusion From Gross Income
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Service members in the U.S. Army, Navy, Marines and Air Force, as well as the Coast Guard, can have some of their military pay excluded from gross income in their taxes, so they don’t have to pay income taxes on the excluded pay. To be eligible for this tax benefit, service members must be deployed and serving in a combat zone. Enlisted personnel and warrant officers can have all their pay excluded from gross income for all months during which they served at least part of the month in a combat zone. Commissioned officers can also claim this benefit, but the amount they can exclude from gross income comes with a cap, which can change from one year to the next.
Exclusion From Gross Income Outside Combat Zone
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In some instances, service members deployed but not in a combat zone can have military pay earned while on deployment excluded from gross income on their taxes. For instance, a service member stationed on a ship, or just outside of a combat zone, who must fly over the combat zone to conduct military operations, has the same right to exclude his military pay from gross income calculations. On the other hand, a service member who is not in a combat zone and does not go into one as part of his military deployment can’t access this valuable tax benefit unless he’s in an area that provides direct support to service members in a combat zone and as a result is in imminent danger.
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Excludable Allowances
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Service members, including those who are on deployment, can have certain allowances excluded from taxation, even if they must be reported on tax returns. These include pay given for uniforms, professional education, housing, moving, travel and burial expenses. They can also receive certain in-kind allowances, including assistance with medical and dental expenses, tax free. The list of excludable allowances is long, so be sure to consult the Internal Revenue Service at tax time.
Filing While Deployed
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Being halfway across the world in the service of your country does not excuse you from filing a tax return. While being deployed can being many day-to-day concerns, it’s important not to forget about filing your tax return. However, the IRS does show some mercy with tax deadlines for deployed service members. While individuals can ask for a six-month extension on their taxes by completing Form 4868, service members outside of the country get an automatic, two-month extension to file. You may also have any tax payments due to the IRS deferred until your military service is over.
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