U.S. Military Members Qualify for Special Tax Breaks

As the July 15 tax filing season deadline approaches, members of the active duty and reserve military and their families are eligible for special tax benefits that can ease the filing process.

Most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after the July tax filing deadline. Some of these programs may be impacted by the current COVID-19 so it’s best to check first.

Service members who prepare their own tax return qualify to e-file their federal return for free using IRS Free File if their income in 2019 was below $69,000. All military members and some qualified veterans may use MilTax, a free tax service from the Department of Defense and Military OneSource. The IRS also offers Free Fillable Forms which can completed online and then filed electronically regardless of income amount.

“Military members serving our country at home and abroad earn the IRS’ highest appreciation and ongoing support,” said IRS Commissioner Chuck Rettig. “We have resources available at IRS.gov that detail the special circumstances that can affect tax payment and return filing deadlines for military personnel and their families. We encourage them to visit our website. We are also very proud of the many veterans employed by and part of the IRS team.”

IRS Publication 3, Armed Forces Tax Guide, is a free booklet filled with valuable information and tips designed to help service members and their families take advantage of all the tax benefits allowed by law. Several key benefits are outlined below.

Combat pay is partially or fully tax-free. Service members serving in support of a combat zone or in a qualified hazardous duty area may also qualify for this exclusion. In addition, U.S. citizens or resident aliens, such as spouses, that worked as contractors or employees of contractors supporting the U.S. Armed Forces in designated combat zones, may now qualify for the foreign earned income exclusion.
Members of the military who serve or have served in a combat zone or in contingency operations outside the United States, may qualify for an extension of at least 180 days to file and pay their taxes.
The Earned Income Tax Credit is worth up to $6,660. Low- and moderate-income service members who receive nontaxable combat pay can use a special computation method that may boost the EITC, meaning they may owe less tax or get a larger refund.

A service member and their spouse can each choose to have their nontaxable combat pay included in their earned income for purposes of the EITC. Service members are encouraged to select the option that best benefits them.

Those who served in the Sinai Peninsula of Egypt may qualify for combat zone tax benefits retroactive to June 2015. Under the Tax Cuts and Jobs Act (TCJA) members of the U.S. Army, U.S. Navy, U.S. Marines, U.S. Air Force, and U.S. Coast Guard who performed services in the Sinai Peninsula can now claim combat zone tax benefits.
Dependent care assistance programs for military personnel are excludable benefits and not included in the military member’s income.
The moving expenses deduction is suspended in tax years 2018 through 2025, except for certain Service members. Active duty Service members who move pursuant to a permanent change of station order may still claim this deduction. Also, Service members who move due to a permanent change of station order may exclude from tax any moving reimbursements they receive.

Both spouses normally must sign a joint income tax return, but if one spouse is absent due to certain military duty or conditions, the other spouse may be able to sign for him or her. A power of attorney is required in other instances. A military installation’s legal office may be able to help.

The IRS has a special page on IRS.gov with Tax Information for Members of the U.S. Armed Forces

Benefits