Military Tax Resources and Services
Military Tax Resources And Services
What follows is not tax advice on how to file your state or federal income taxes. This is a resource guide for income taxes, and you should always consult an IRS rep or a tax professional before filing in the current tax season.
Tax laws are subject to frequent change, and what was permitted last year may not be allowed this year, and vice-versa.
Military Taxes: What You Need to File
How do you get your taxes done as a military member, spouse, or working-age dependent child? A jump start helps. Begin as early as possible, especially when gathering your documents.
Starting early means deciding whether to try filling out your tax forms or get assistance or have a professional complete the forms.
No matter which option you prefer, you’ll need to gather documents and information to submit with your forms. Depending on circumstances, these may include:
- Social Security numbers
- Dates of birth for all listed on the tax form
- W-2 forms or equivalent
- Proof of child care or adoption expenses
- Proof of education benefits
- Investment income forms
- Social Security benefits
- Form 1098-E (Student loan interest)
- Form 1098 (Home mortgage interest)
- Medical bills
- Dental bills
- Real estate tax documents
- Receipts for deductions
If you aren’t completing your own tax forms or you are completing them with assistance, there are questions you may wish to ask.
For example, are you curious about claiming a specific type of deduction? Do you want to know how much home loan interest you may be permitted to write off your taxes this year?
- It’s critical to ask these questions of the right tax professional. When using MilTax or guided tax prep help from the IRS, you’ll get help from resources and assistants with military-specific information.
- If you use a civilian tax preparer who doesn’t necessarily know the specific tax benefits you may be entitled to, you could miss out on important deductions or other tax breaks.
When considering a tax professional, be sure to ask whether they have specific experience filing taxes for someone in your circumstances.
If you earned money in a combat zone, were eligible for VA disability pay, or got a reenlistment bonus, you’ll want to ask the tax professional about these areas and how much experience they have with them.
Read more: How Do I Apply For Armed Forces Tax Benefits?
Income Tax Benefits For Military Members
Federal and state income taxes feature many benefits for veterans. One of those is the Earned Income Tax Credit, typically offered to those who earn under a set amount ($59,187 in tax year 2022, your experience may vary) and have less than $10k in investments.
Check the IRS official site to learn if you are eligible for Earned Income Tax Credits (EITC). But there are many other tax benefits for military members.
RELATED: PCS Resources and Support for Military Moves
State Income Taxes
There are no standardized procedures for state taxes; the laws of your state determine what’s possible for deductions, exemptions, and tax credits. In general, military disability retirement pay is not taxed, but some states do tax some or all military retirement pay unrelated to a VA disability rating or a military medical discharge.
Decide Whether Keep Your Home Residency State
If you get orders to relocate, you may be allowed to keep your permanent legal residence in your home state or choose the new state.
- Generally, when you live in a state that collects income tax but maintains residency in a state that doesn’t, you don’t have to pay income tax in the new state. Ask a tax professional whether this applies to your circumstances or not.
- If income tax is withheld from your paycheck, you can file a nonresident return with that state to receive a refund.
- If you are in the National Guard or the Reserves, do you drill in one state and live in another? If the state you drill in has state taxes and the state you live in doesn’t, you may still be taxed on your drill pay.
States with No Personal Income Tax
You may be in luck if your spouse is a resident of any of these states. According to TurboTax.com, many states do not have a personal income tax, including:
- South Dakota
Read more: Tax-Free Military Retirement in These States
Suppose you own a home and pay property taxes. In that case, those tax payments may be deductible from your federal income tax bill, according to Intuit TurboTax, which adds, “Most state and local tax authorities calculate property taxes based on the value of the homes located within their areas, and some agencies also tax personal property.”
- Taxpayers paying either type of property tax may qualify to claim a tax deduction by itemizing Schedule A deductions on IRS Form 1040.
- Many veterans may qualify for property tax exemptions at the local level, to learn what these exemptions are and how to claim them in your county, reach out to your nearest Tax Assessor’s office.
Capital Gains Taxes
Federal income tax laws include regulations about how profits on the sale of a primary residence are taxed. Under the right conditions, active duty service members may be allowed to exclude a portion of those profits. In the 2022 tax season, that amount was $250,000 for single filers and $500,000 for married filers. There are conditions; you must have lived in the home for at least 24 months before the sale. This tax deduction is at the federal level, not the state level, though some states may offer similar tax relief depending on circumstances.
Need information on state-provided veterans’ benefits? Please visit CollegeRecon’s State Veterans’ Benefits page.
Military Spouses and State Income Taxes
Military spouses may be able to claim either the same state of legal residence as their partner or claim the state they’re living in. In certain cases, they can claim the state of legal residence they had before marriage.
Under the Servicemembers Civil Relief Act (SCRA) you won’t be double taxed if your spouse works and is taxed in one state and has a permanent legal residence in another.
The Veterans Benefits and Transition Act of 2018 allowed military spouses to choose the same state of legal residence as their service member. These rules covering the military spouse state income tax apply to local taxes and for voting purposes. All this, even if they have never lived in that state.
Standard Deduction or Itemize? Ask a Pro
Ask your tax preparer about this year’s standard deduction and do the math to determine whether or not your itemized deductions add up to more savings. Typical itemized deductions include:
- Home mortgage interest
- Property, state, and local income taxes
- Medical and Dental expenses
- Charitable contributions
- Miscellaneous itemized deductions
Military Tax Filing Services
IRS Free Tax Filing for Military
IRS Free File helps you prepare and file your federal income tax online using guided tax preparation.
How IRS Free File Works
- Begin at the IRS.gov official site to take advantage of Free File offers.
- Choose between an IRS Free File offer of Guided Tax Preparation or Free File Fillable Forms.
- If you choose Guided Tax Preparation, choose a tax prep provider and view offers.
- Select your tax prep provider and start filing your federal tax return.
- If you choose Free Fillable Forms, click “Use Free Fillable Forms”.
- You must create a brand new account every tax year to file. According to the IRS official site, Free File Fillable Forms closes each year at a specific date (October 20 was the date set in 2023), and your account is deleted at this time.
- Filing early is helpful, especially if you need to file an amended return with corrections later.
Free Income Tax Help From VITA
The IRS’s Volunteer Income Tax Assistance (VITA) program is another resource for free basic tax return preparation. However, the scope of this program is more limited. In general, VITA serves:
- Those who earn $60,000 or less
- Disabled taxpayers
- Taxpayers with limited English skills
VITA is the “main IRS outreach for military personnel and their families.” VITA can be a big help if you seek free military tax prep, but VITA help is not available in all areas or at all bases. Find the nearest VITA site near you using the VITA Locator Tool.
MilitaryOneSource and MilTax
Members of the military have free tax prep and filing software called MilTax available to them through Military OneSource.
- There is also the option of scheduling appointments for one-on-one help from MilTax experts, who the official site describes as “tax pros with special training in military-specific tax situations.”
- These appointments can be via phone call or online chat 24 hours a day.
- See the Military OneSource official site for phone, chat, or email contact information.
The e-filing software is available to Military OneSource account holders–if you need this software and don’t have an account, you will need to set one up first.
AARP Foundation Tax-Aide
This free tax prep service is offered to everyone regardless of age or occupation, with a “special focus on taxpayers who are over 50 or have low to moderate income,” according to the official site. In-person and online tax help is available nationwide. Tax-Aide reps are IRS-certified each year “to make sure they know about and understand the latest changes and additions to the tax code.”
TurboTax Free for Military
Enlisted active duty and reserve military members can file their state and federal taxes for free with TurboTax when this feature is offered in the current tax season.
This has, in the past, typically applied when the applicant is filing their own taxes and does not need assistance. If you are a USAA member, you may qualify for a TurboTax military discount. You may qualify to get $20 off TurboTax as a USAA member.
TaxAct offers free federal and state filing for all members of the military.
TaxSlayer offers free federal tax filing for military members “regardless of the situation.”
Income Tax Terms You Should Know
One caveat to keep in mind when reading about military tax issues–there is a technical difference between a military tax credit and an income tax reduction. In many cases, these two terms are used interchangeably, but they aren’t really the same thing.
Income tax deductions reduce the amount of income subject to taxation, a tax credit lowers the amount of tax you owe. The difference being that reducing your income means paying less in taxes overall, whereas a tax credit simply lowers the bill once those taxes are calculated. Ask a tax professional or an IRS representative if you aren’t sure how this applies to you.
An income tax deduction reduces the amount of income that is taxed. An income tax credit directly reduces the tax that you owe by the full amount of the credit. In the case of a nonrefundable credit, your tax can only be reduced to zero, or no taxes due. In the case of a refundable credit, the credit may reduce your tax to zero, resulting in a payment to you.
Adjusted Gross Income: This refers to your income minus “adjustments.” The amount of your Adjusted Gross Income informs other areas of your federal taxes, such as whether you qualify for certain tax credits.
Combat Pay Exclusion: Active duty combat pay in recognized combat zones is tax-exempt.
Combat Zone Tax Filing Extension: When deployed, your tax deadlines are automatically extended for federal income tax filing. The federal tax extension is 180 days from the last day of duty in the qualifying area OR the last day of any qualifying hospitalization from service in the combat zone. Note that this does NOT apply to state income taxes; your state’s laws will determine state tax deadlines.
Non-Taxable Income: In general, taxable income includes: non-combat pay, bonuses, incentives, and student loan repayment from specific programs. Non-taxable income includes military housing allowances, food allowances, death benefits, GI Bill education benefits, and reimbursement for official travel expenses.
Non-Reimbursed Moving Expenses: Ask your tax professional or an IRS rep about your ability to deduct moving expenses in the current tax season. Depending on current tax law, you may be allowed to deduct certain costs associated with your move.
Child Tax Credit, Credit for Other Dependents, and Additional Child Tax Credit: These deductions are not exclusive to military members, but if you have children or are planning a family, be sure to ask a tax professional about these credits.
Tax Forgiveness: If a servicemember dies under certain circumstances, their next of kin may be relieved of federal tax liability. This benefit is not automatic and must be applied for. Tax forgiveness may be possible if a member of the U.S. Armed Forces dies on duty in a combat zone, or from the results of that service. Other circumstances may apply.
Read more: Veteran Tax Benefits
- Self Employment Taxes: An Overview
- Payback Deadline for Deferred Social Security Tax Extended
- Military Impact of Payroll Tax Deferral
- Troops to Receive Stimulus Checks and More Payback Time for Deferred Taxes
About the author
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.