We’re in the thick of tax season, and most military personnel and their families must file their taxes before the April 18th cutoff. In contrast to the majority of U.S. citizens, service members are eligible for a variety of military-specific tax breaks and deductions. While nothing can pay back the time and effort these wonderful individuals deserve for defending our country, there are many tax provisions available for our servicemen and women and their families to take advantage of. If you’re personally handling your taxes this year and are in the service, these are the tax tips you need to know before you file.
Hire a Professional
While many wonderful tax companies offer free filing services for military members, sometimes more detailed and intensive help is required. If you’re concerned about missing out on lucrative exemptions or your filing will be more difficult this year, consider using the help of a tax professional from a company like Community Tax. A well-versed finance expert will be knowledgeable with the tax rules specifically regarding the military community, and help you save more money than you might have trying to file on your own, along with helping keep you out of hot water with the IRS.
Is Combat Pay Considered Income?
When filing, remember that any payment received from time in combat need not be included in your taxable income. However, it can be claimed on your EITC—that’s Earned Income Tax Credit—filings. This can help in situations where you would have claimed no earned income, which would disqualify you from receiving an EITC refund. This is definitely an all or nothing situation, however. You must either report all of your combat income earnings, or none at all—there are no in-betweens. The Earned Income Tax Credit can provide a hefty sum of tax credit, ranging from $450 to $5,000 for qualified individuals so it’s definitely a worthy route to consider. Other qualification considerations: the taxpayer must fall between the ages of 25 and 65 years old, and make less than $3,150 in investment income.
A Reduced Interest Rate
If you entered the service with pre-existing debt, the government gives you a break on the hefty interest charges that can come along with paying back a longstanding bill. Instead of continuously appreciating, the IRS has to cap the interest rate they charge at six percent. There are caveats to this deal, however; you will only qualify if your military service provably hinders your ability to pay, and only applies while you are still a member of the military.
The Various Deductions
There are a host of deductions available to military members, and missing out on these can mean missing out on a fortune in savings. Failing to claim all of your qualifying deductions can result in a smaller refund, or even see you having to pay more when tax season rolls around. Moving expenses due to relocation efforts from the military are tax deductible and transportation fees due to Federal Reserve and Federal Guard duties are also deductible depending on the distance traveled and the lodging required. Even military uniforms can be applicable for a tax reductions, so long as they’re articles of clothing you’re prohibited from wearing when not on duty. There are reductions available even after you’ve left active service, like job hunting expenses including travel, resume preparation fees, and any agency fees that you may have to cover while searching.
Are the Deadlines Different?
While the majority of military families are required to file before the April 18th deadline this year, those serving in combat zones are automatically given a 180-day extension to file their taxes. Keep in mind however that the deadlines for both Medicare and Social Security are exempt from this rule, so you’ll need to remain updated on those two facets of the tax process.
While many of these deductions and tax breaks require a bit of digging to discover, taking the time to find them yourself or investing the money in a professional tax preparer is often well worth the investment. If you’re a military member and looking to reduce your tax debt this year, consider these wonderful tips and make filing easier—and more profitable—than ever.
