Important Tax Tips for Military Families
Creative Ways to Cut Your Tax Bill
Even soldiers have to pay taxes. That said, military families have access to some unique tax-reducing strategies that aren’t available to civilians. Understanding and following the tax tips outlined below may help you cut your tax liability and put some extra money in your pocket.
Deduct Your Moving Expenses
Moving costs a lot, and when it’s due to a permanent change of station, (PCS) you aren’t always reimbursed for the costs. However, you may be able to deduct some of the expenses from your taxes. The IRS allows military families with PCS orders and unreimbursed moving expenses to write off “reasonable” costs associated with relocation and moving. Of course, the definition of “reasonable” can change, depending on your family’s specific situation. So you should speak with a tax expert who can make sure that you’re writing off everything that’s allowable.
And, as odd as it sounds, the IRS’s website actually has some valuable pointers.
You Get Free Help with Your Taxes
In most cases, civilians have to pay someone to help them with their taxes, but servicemembers and their families have access to free tax help. You’ll find that your base has a number of tax professionals on hand to help answer questions, provide guidance, and even help you file your taxes through the Volunteer Income Tax Assistance Program. These individuals are all certified by the IRS and volunteer their time and expertise to assist military families with tax problems and concerns.
Putting aside what you have to do to earn it, one of the benefits of combat pay is that your family doesn’t have to include it in your annual income (which makes it tax-free). In certain circumstances, you may actually want to count combat pay as income. For example, increasing your annual earnings might make you eligible for certain tax credits such as the Earned Income Credits. Unfortunately, including or excluding combat pay is an all-or-nothing deal, meaning that you either take the whole thing or none of it.
Don’t Sweat the Deadline
Just the mention of April 15—the traditional deadline for filing taxes—is enough to strike fear into many civilians’ heart. But since servicemembers have so many other things to occupy their minds, they aren’t held to the same schedule. If you’re going to miss the deadline to file, and you’re stationed in a combat zone, you automatically gain an extra six months of time to get your information in. That applies whether you’re paying your taxes or filing for a tax refund.
Saving During Transition
If you or your spouse are transitioning from military life to civilian life, you might have some tax write-offs that can save you a considerable amount of money. Some of the costs you incur having to do with finding employment, for example, could be deductible. These include assistance creating a resume, travel for interviews and applying for work, and even some job placement fees.
Spouse State Taxes
Before the Military Spouses Residency Relief Act, military spouses had to pay income taxes to the state where they happen to be stationed, as well as to their official home state. This created a heavy burden. With the passing of the MSRRA, spouses are no longer required to pay both. They can now pay only the income taxes for their official state of residence, and avoid being taxed in where they’re living. This can offer significant relief if your home state’s tax rate is lower.
There are many other ways to save on your taxes, so speak with a tax professional on base to learn more.