Military and Veterans Tax Refunds Guide: Deductions, Deadlines and Benefits

If you currently serve or have served our country, tax breaks and free tax assistance are available to you. Find out how you can save money this tax season in our military and veterans tax guide.

Being a military member comes with all sorts of financial complications and benefits. Military members can take advantage of a separate retirement system. And they get a variety of tax breaks and benefits. But all of those tax breaks can also be confusing when it comes to filing your taxes.

So whether you’re a current military member or a veteran, here’s a guide to what you need to know about your taxes.

Tax benefits Military Members

If you’re a current member of the military, you qualify for excellent tax benefits, especially if you’ve served in or supported a combat zone. Here are some benefits you need to know about.

Combat Zone Exclusion

If you’ve been paid to serve in a combat area, direct combat support area, or qualified hazardous duty area, you may be able to exclude some or part of your pay from your taxes. You can get a current list of combat zones here.

What this means is that your overall taxable income gets reduced, which reduces your overall tax liability. In fact, you could end up owing nothing in taxes or even getting money back from the government.

Even though you don’t have to pay taxes on qualified combat pay, you can use it to qualify for the Earned Income Tax Credit (EITC). This special tax credit is available to anyone who earned income but fell below a certain income threshold. So even though you don’t pay taxes on this income, it still counts as earned income. If you fall within the income requirements, your tax return could get a significant boost from the EITC.

Deadline Extension

Taking care of your tax returns can be difficult if not impossible when you’re in a combat zone or close to one. That’s why you’ll get a deadline extension for filing your tax return and paying your taxes. The deadline extension is typically for at least 180 days after you leave the qualified zone, and it applies to both filing your taxes and paying them. This can help you avoid the fees and interest charges others have to pay if they are late on filing their taxes.

Deductions for Military Members

As a military member, you can also take certain tax deductions for expenses related to your military service. For instance, if you have to move due to a permanent change of station, you can deduct some of your moving costs that weren’t reimbursed. So be sure you keep those receipts from the movers!

You can also take a deduction when you pay for uniforms (or their upkeep) that you can’t wear when you’re off duty. Just remember that if you get an allowance specifically for uniforms and their upkeep, you’ll have to subtract that from the deduction you take.

If you’re in the reserve, you can deduct travel expenses for any duties that take you more than 100 miles away from home. Typically travel deductions only apply if you itemize your deductions, but as a reservist, you can take this deduction even if you take the standard personal deduction on your tax return.

Signing Your Forms

If you’re a military spouse filing a joint income tax return while your husband or wife is on duty, you may be able to sign the tax form for him or her. This isn’t typically allowed. But it is allowed in certain circumstances for military families.

Forgiven Taxes

In some situations, if you haven’t yet paid your taxes or even if you’ve already paid them, your tax bill can be forgiven if you die in a combat zone or from health problems arising from your time in a combat zone. Be sure that your family knows about this particular benefit in case the worst should happen. Even if you’ve already paid your taxes for that year, you could have them refunded.

Along with this, the death gratuity benefit of $100,000 paid to survivors of deceased Armed Forces members is not taxable.

Save on Sale of Your Home

Typically if you buy and sell a home within five years, you could pay additional income taxes on the capital you gain from the sale of the home. With military members, if you’re required by your job to live at least 50 miles from your residence or have to live in government housing for at least 90 days, you may be able to suspend this rule for up to 10 years. This is just something to keep in mind if you’re a homeowner in the military.

Tax Benefits Veterans

If you’re honorably discharged or retired from the military, you can also get access to several potentially valuable tax benefits. However, they’re obviously different from those allowed to active-duty military members and reservices. Here are the main benefits you should know about as a military veteran.

VA Pay

The primary benefit for veterans is that any pay from the Department of Veterans Affairs (VA) are completely excludable from your taxes. This includes disability compensation and special monthly compensation. You can also get tax-free grants for adapted housing if you qualify with a disability, and any other services or payment you receive for your military-connected disability are income-tax-free.

If your family is eligible for dependency and indemnity compensation, that benefit is also tax-free.

Property Tax Benefits

If you’re a homeowner and a disabled veteran, you may be able to ease the burden of homeownership by lowering or eliminating your property taxes. In some states and localities, you can access this benefit even if you aren’t disabled, though it’s more commonly available for disabled veterans. These exemptions have different rules and regulations in different states and localities, so be sure you look into what’s available in your state and county.

In some cases, these benefits are tied to your income and the value of your home. So if you live on a modest income, you may be eligible to stop paying your property taxes. In some areas this can save you thousands of dollars per year.

Even if your disability rating is only partial, you should definitely connect with your local property taxing authority to find out if there are any property tax benefits available to you.

Death Benefits

Again, any death benefits you receive because of your service or insurance related to your service will be tax-free for your family.

Free Tax Help For Military Personnel And Veterans

All of these benefits can work together to save military members and veterans a significant amount of money. However, they can be confusing to sort through, and you might need some help to make sure you’re taking advantage of all of the benefits available to you. Luckily, military members may be eligible for additional free tax assistance or discounted tax preparation software.

For instance, FreeTaxUSA and TurboTax offers a military edition, which can be discounted or free if you’re a junior enlisted member. TaxSlayer also offers a military version. These versions ensure that you get the correct write-offs for your military-related tax situation.

If you currently live on or near a military base, you may also be able to get free or low-cost in-person tax help. Be sure you ask around at your base before you file your taxes this year.

Our service members and veterans have done so much to serve their country that tax breaks are the least we can give back. But even if you qualify for these breaks, you’ll generally have to actually apply to get them, so be sure you check out whether or not you qualify for these military and veteran tax benefits.

Topics: Taxes

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