Tax Deductions for Service Members

Tax season is right around the corner. Which means you’ll soon be thinking about the best ways to make the most out of this tax season—you probably should have thought about this before January 1, but we’re not judging, too much—and trust us, there are plenty of deductions for you to take advantage of. That’s why we’ve taken the time to make a Tax Deductions for Service Members guide. Keep reading to find out what tax deductions you can take advantage of this tax season, some of them might surprise you.

Combat Pay Exclusion

Okay, so we know this one might not surprise you, but it’s a pretty big deal when you go to file your taxes. If you didn’t already know, combat pay exclusion means you don’t have to report the income you made as a result of your deployment. Which is great, considering you make more money when you’re deployed—of course, if you’re that idiot who somehow loses money on a deployment, you can’t be helped—seriously though, if you’re not spending all your cash on protein powder and new trucks, you might be able to make a little extra, or at least hold onto more of it because you won’t have to worry about paying taxes on it.

If you’re having issues with your taxes or need help filing, check these guys out:

Deadline Extension

With your deployment, you also qualify for a deadline extension. For instance, let’s say you were deployed during tax season. Doing your taxes during a deployment isn’t exactly ideal. And thanks to the deadline extension, you don’t have to worry about it. Neither does your non-military spouse—more on that later.

Your extension to file is 180 days after you return from your deployment plus the number of days that were left to file once you entered the combat zone. To clarify, in 2017, individuals had from Jan 1-Apr 18 to file their taxes. Let’s say you deployed before January 1, you were gone 6 months and now you’re back and need to file. You get 180 days to file, plus an extra 3.5 months added to that.

Another example: Say you deployed on Mar 30. When you return from your deployment, you will have 180 days plus 18 days (April 1-18) to file your taxes with the IRS.

Now back to spouses. If you’re a spouse or you have a spouse not serving in the military, the extension applies to them as well. However, there are a few exceptions to spousal privileges.

Per the IRS:

The extension doesn’t apply to a spouse for any tax year beginning more than 2 years after the date the area ceases to be a combat zone or the operation ceases to be a contingency operation.
The extension doesn’t apply to a spouse for any period the qualifying individual is hospitalized in the United States for injuries incurred in a combat zone or contingency operation.

Military Savings Deployment Plan

Besides not having to pay taxes on any deployed income, is your chance to invest and make extra money off your non-taxed income. When you’re deployed, and only when you’re deployed, the military offers something called a Military Savings Deployment Plan. You are authorized to contribute no more than $10,000 and make 10% off that contribution. There are some rules though.

You cannot contribute more money than your deployed paycheck each month
You must be in-country for 30 days before making your initial contribution
You can only invest every 30 days after your initial contribution
You can only receive interest on your contributions 90 days after you return home

If you are, know, or want to be a veteran soon, check out our Tax Relief Guide for Veterans.

Uniform Expenses

There used to be a time when you didn’t have to pay for your uniform. Unfortunately, times have changed, and most of your uniform expenses come out of your pocket. Did you know, however, that you can claim some of your uniform purchases on your taxes? You can claim any purchase made for devices, rank insignia, and even dry cleaning expenses, so long as they weren’t reimbursed. And considering how much it costs to keep a uniform up, this is a great deduction.

There is a slight downside. If you’re on active duty, you cannot claim the purchase of uniforms on your taxes. However, if you’re a reservist you can. Unfortunately, no matter which component of the armed forces you’re in, not a lot of service members take advantage of this tax deduction.

Transportation Expenses

Deductions for your transportation costs might not be too surprising. What’s surprising is what’s covered under your transportation deductions. For instance, you travel to and from your assigned duty location is not covered. However, if you have to attend a meeting or have a temporary assignment —under one year—you can deduct it from your taxes. Also, you can deduct your car’s maintenance costs—yes, you read that right.

Qualified Education Expenses

Education expenses may be another deduction you aren’t aware of. And we aren’t talking about GI Bill/Tuition Assistance deductions—the military is already paying for that. We’re talking about the educational courses you chose to take to give you a leg up during promotions. The military might not require you to take certain classes, but they improve your employment somehow—these are the types of educational expenses we’re talking about. The stuff the military doesn’t pay for or won’t reimburse you for.

For instance, all those books you paid for out of pocket, you can claim them.

Professional Dues

Ah, we’ve all been there. That first moment you’re voluntold to do something. Yeah, it’s not a once-in-a-lifetime event. Voluntold to help with some BS bake sale, voluntold to help put together a unit Christmas Party, Voluntold to do anything that has nothing to do with unit readiness or the mission, etc. It’s like mandatory fun but with work involved. And it’s seriously a never-ending thing. It would be one thing if you knew about these types of obligations before joining, but let’s face it, promises of running a bake sale on your day off don’t get dotted lines signed.

Then there’s all the forced education. Okay, maybe it’s not forced; no one is holding a gun to your head. But, it’s so highly recommended that you can’t promote beyond some ranks without it.

And finally, all the professional organizational hoopla. Yes, that’s what it is. You might not want to join, but someone in leadership once told you when you were a young Private, “You have to stand out if you want to promote, go join XYZ and you’ll look better than that pile of s**t over there”. So, that’s what you did.

You’ve basically done it all, volunteered out the wahoo, educated yourself so much, you can’t understand why you’re not a genius yet, and now you’ve joined this so-called, going to get you promoted “professional organization”. It sounds…boring. But, we have good news, yet again. If you paid dues to that professional organization, you can claim it on your taxes. Unfortunately, a lot of troops don’t know about this deduction and let their hard-earned cash fly out the window.

And no, Officer and NCO clubs are not considered professional organizations. So, no matter how much money you pay in dues, they don’t apply and you can’t deduct them from your taxes. It’s more like the American Society of XX types of organizations.

Moving Expense Deduction

Moving is a part of being in the military. You’re at one place for what seems like a blink of an eye and then you’re out the door and on your way to the next duty station. Generally, the government pays for any costs it would take to move you and your family. However, if your cost to move exceeds the amount the government will pay, then you can include that as a part of your tax deductions.

For instance, if it costs more money than the government will pay or reimburse to travel to your next permanent duty station, you can claim it. If it costs more money to move your personal belongings than the government is willing to pay for or reimburse, you can also include that on your tax deductions. Just remember, if the government pays for it, you can’t claim it.

If you’re getting ready to move and thinking about using a VA Loan, start by reading our VA Loan Guide here.

Travel Deductions

Travel deductions benefit Reserve and Guard components of the Armed Forces more so than the Active Duty component, and that’s because a majority of travel expenses aren’t covered by the government. However, travel deductions for a Reserve or Guard member only qualify if they are traveling more than 100 miles away from home. You can also include any expenses for meals or lodging during you 100+ miles of travel.

And for those of you who want to be difficult, no, going home on leave or to visit family and friends is not a taxable travel deduction.

EITC

Earned Income Tax Credit or EITC is another tax break too many qualifying service members don’t take advantage of. You either need to file as single with significantly low income or have at least one qualifying child. The income qualification changes yearly, so if you don’t qualify this year, there’s a chance you could qualify the following year.

Your income must not exceed the below amounts, per the IRS, as of 2017.

$39,617 ($45,207 for married filing jointly) if you have one qualifying child.
$45,007 ($50,597 for married filing jointly) if you have two qualifying children, or
$48,340 ($53,930 for married filing jointly) if you have three or more qualifying children

How does this relate to a deployment? Well, if you’re deployed, you receive non-taxable income, which means you don’t have to report it to the IRS. This means, if you deploy for a year, your non-taxable income doesn’t need to be reported and you would most likely qualify for EITC whether you were single, married, or have 1 qualifying child versus 7. Make sure you ask your tax agent about this before you file! It could get you several thousand $$$ back from the IRS, depending on your situation and the number of children you have.

Charitable Gifts

Being a service member, you’re often approached by various organizations to make charitable donations. We’re also in the habit of donating our old stuff when we PCS and over a year that could add up. If you contribute more than $250, you’ll have to have a dated receipt. And if you’re giving away more than $5,000 worth of stuff, you’ll need an appraisal. Either way, it’s a deduction on your taxes so you might want to look into that.

Home and Office Storage

If you’re reading this, chances are you’re either in the military, about to join the military or you know someone who’s in. If this is the case, there’s also a chance you have or will have a room in your home dedicated to the storage of military gear and equipment. And guess what, it’s a tax deduction you can claim based on square footage.

Let’s say you’re a First Sergeant or Commander, there’s a good chance you have a home office, which you’ve dedicated to your military work. This too is tax-deductible. So, talk to your tax agent and see if you qualify.

Can you deduct vehicle storage from your taxes?

Vehicle storage for a deployment can be a hassle. You have to worry about insurance, where to store it, who to store it with, and if someone will be maintaining it, who. What you don’t have to worry about is if you can deduct it from your taxes—at least not after reading this. You’re welcome.

We can’t make fun of you for wanting to know this, because a lot of people are asking it. And frankly speaking, you can’t even deduct your uniform purchase, why would car storage be any different? At least, that might be what you’re thinking.

The good news, however, is you can deduct your storage costs from your taxes as a result of a deployment—if the military isn’t paying you or won’t reimburse you for the cost.

Military Uniforms

We’ve covered this one already so we won’t elaborate much more. But just to reiterate, if you’re on active duty, your uniforms are not tax deductible. This includes civilian clothes you might have to wear as a part of your duties. Why can’t you take advantage of this deduction, but Reserve and Guard members can? Because you get a clothing allowance paid to you by the government, and the other components don’t.

Military Haircuts

No, unfortunately, you can’t claim your haircuts on your taxes. Yes, we know you have to keep your hair within regulations, and for men, it’s a regular cost. However, it’s not deductible according to the IRS, so don’t even try.

Gym Membership

Yes, this is another expense you might be paying out of pocket, but the IRS doesn’t deem it deduction-worthy. Probably because you don’t need a gym to get in shape and you can attend the gym for free on a military installation. It’s not the IRS’ fault you want a better place to work out.

Publication 3

If you’re ever concerned about what does and doesn’t qualify as income, what you can and cannot deduct from your taxes or how your military service affects your tax obligations, yes, talk to your local tax agent, but also reference Publication 3.

Publication 3 comes directly from the Department of the Treasury Internal Revenue Service, and it’s called the Armed Forces Tax Guide. This guide is perfect for Active Duty members and Reserve or Guard members on active duty orders or performing their monthly/annual obligations. If you’re thinking about getting out of the military, maybe you should check out these tax relief options for veterans here, and get a leg up on the system.