Tax Breaks for Members of the U.S. Military by Jack Winter, CPA/PFS, CFP

Posted on September 07, 2016 by Jack Winter

The United States provides active members of its Armed Forces with unique opportunities to save money and exclude certain types of their pay from taxes. Lowering one’s tax liability requires members of the military to understand special rules that apply to them for applying tax breaks, credits and deductions.


Combat Pay Exclusion. Members of the military who are serving in a combat zone designated by an executive order from the President may exclude all or a portion of their pay from U.S. income taxes.


Earned Income Tax Credit (EITC).  Recipients of non-taxable combat pay have the option to include that amount in their taxable income in order to increase their EITC. The result could mean less taxes owed and the potential for a larger refund.  Members of the military should forecast which option benefits them the most.


Moving Expense Deduction. Members of the military may be able to deduct some of their unreimbursed moving costs when being transferred to a permanent change of station.


Uniform Deduction. Armed services members may deduct the costs they incur to purchase and maintain certain uniforms that they cannot wear while off duty. The deduction is reduced by any allowances received for those costs.


Reservist Travel Deduction. Reservists whose duties take them more than 100 miles from home may deduct unreimbursed travel expenses, even when they do not itemize their deductions.


ROTC Allowances. While active duty ROTC pay is taxable, ROTC students may exclude from their taxable income certain allowances for education and subsistence received during advanced training.


Civilian Life.  When members of the armed forces look for work outside of the military, they may be able to deduct some of their job search-related expenses, including costs for preparing a resume, job-placement agency fees or travel.


Military service takes individuals away from home making it difficult to sign a joint tax return with a spouse and/or meet the annual April 15th tax-filing deadline.  Under certain conditions, a spouse at home may sign a tax return on behalf of a military spouse. Alternatively, couples may be required to have a power of authority permitting such authorization.


When members of the military serve in a combat zone, they may have the ability to postpone their tax filing deadline. For these individuals, automatic filing extensions of between two and six months may apply.


About the Author: Jack Winter, CPA/PFS, CFP, is an associate director of Berkowitz Pollack Brant’s Tax Services practice, where he works with individual taxpayers and entrepreneurs on estate planning, tax structuring and business consulting. He can be reached in the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via email