USA — Tax Laws Benefit Troops, Families

WASHINGTON — Ser­vice mem­bers and their fam­i­lies have a few tax advan­tages at their dis­pos­al, as well as a few extra days in which to com­plete their tax­es this year, a Defense Depart­ment tax expert said.
Due to Eman­ci­pa­tion Day, a hol­i­day rec­og­nized by the Dis­trict of Colum­bia, gov­ern­ment offi­cials have pushed the nation’s tax fil­ing dead­line from April 15 to April 18, Army Lt. Col. Evan Stone, direc­tor of the Armed Forces Tax Coun­cil, told Amer­i­can Forces Press Ser­vice.

Along with the fil­ing exten­sion, Stone point­ed out sev­er­al new and exist­ing tax laws mil­i­tary mem­bers and their spous­es should keep in mind as the dead­line draws near.

To start, peo­ple may have noticed an increase in their take-home pay, Stone said. The gov­ern­ment, he explained, reduced the Social Secu­ri­ty tax from 6.2 per­cent of wages to 4.2 per­cent sole­ly for the 2011 tax year.

“For exam­ple, a spe­cial­ist with over two years of ser­vice would prob­a­bly see about a $40 increase per month in his pay,” Stone said. But while take-home pay is on the rise, tax brack­ets won’t change. Con­gress extend­ed the 2010 tax brack­ets through 2011 and 2012, he said.

Oth­er tax laws are spe­cif­ic to mil­i­tary mem­bers and their spous­es, Stone said, cit­ing the Com­bat Zone Tax Exclu­sion as an exam­ple. Under this exclu­sion, for any day a mem­ber spends in a com­bat zone, that entire month’s worth of base pay is exclud­ed from gross income for income tax pur­pos­es, he explained.

There’s no lim­it to this exclu­sion for enlist­ed mem­bers and war­rant offi­cers, he not­ed; how­ev­er, offi­cers are lim­it­ed to $7,714.80. “Any­thing above that would be includ­ed in the member’s gross income,” he said.

Deployed ser­vice mem­bers and their spous­es also have at least a 180-day exten­sion to file or pay tax­es from the date they leave the com­bat zone, Stone said. To invoke this exten­sion, peo­ple should write “com­bat zone” across the top of their return.

Ser­vice mem­bers on duty out­side of the Unit­ed States also are enti­tled to an auto­mat­ic two-month exten­sion, push­ing the dead­line to June 18. How­ev­er, unlike with the Com­bat Zone Tax Exclu­sion, while they gain an exten­sion to file and pay tax­es, the inter­est on any tax­es owed still will accrue from April 18 until tax­es are paid, Stone said.

A sig­nif­i­cant tax break involves mil­i­tary allowances, he said. Under com­pet­i­tive com­pen­sa­tion, hous­ing and food allowances are non­tax­able for income tax pur­pos­es, reduc­ing tax­able income at the end of the year and cre­at­ing a sav­ings of about $2,000 to $7,000, depend­ing on salary, he explained.

“This can be sig­nif­i­cant, with tens of thou­sands of dol­lars that aren’t tax­able,” he said.

Turn­ing to state income tax­es, Stone not­ed they can be com­pli­cat­ed for ser­vice mem­bers and their fam­i­lies, who move with greater fre­quen­cy than many of their civil­ian coun­ter­parts. The Ser­vice Mem­bers’ Civ­il Relief Act has long grant­ed ser­vice mem­bers the abil­i­ty to retain their state of domi­cile for state tax pur­pos­es rather than the state where they are sta­tioned.

For exam­ple, a ser­vice mem­ber may be sta­tioned in Vir­ginia, but owns a home, pays prop­er­ty tax­es and votes in Ohio. That mem­ber is enti­tled to claim Ohio has the state of domi­cile and not file state income tax­es for mil­i­tary wages in Vir­ginia.

The gov­ern­ment amend­ed this same law in 2009 through the Mil­i­tary Spous­es Res­i­den­cy Relief Act. In the past, a mil­i­tary spouse who moved to a new state and estab­lished a new res­i­dence there typ­i­cal­ly would claim that state as the state of domi­cile and pay state income tax­es there, Stone explained. Now, spous­es who move to a new state, reside there sole­ly to live with their ser­vice mem­ber and are there pur­suant to mil­i­tary orders won’t gain or lose a state of domi­cile for state income tax pur­pos­es. Some states, he added, also may require the spouse to have the same domi­cile as the ser­vice mem­ber to be eli­gi­ble.

How­ev­er, the law is com­pli­cat­ed, Stone said, and each state may apply dif­fer­ent guid­ance on the appli­ca­tion of the relief act. He sug­gest­ed spous­es dis­cuss their sit­u­a­tion with a tax advi­sor to avoid being dou­ble taxed.

To help with this tax law and oth­ers, ser­vice mem­bers and their spous­es have a host of free, expert tax-prepa­ra­tion ser­vices at their dis­pos­al, Stone said, from on-base cen­ters to online soft­ware.

Peo­ple can vis­it most any instal­la­tion around the world for free, in-per­son tax-prepa­ra­tion assis­tance through the Vol­un­teer Income Tax Assis­tance pro­gram, Stone said. The Armed Forces Tax Coun­cil over­sees this pro­gram, which is man­aged local­ly by instal­la­tion legal assis­tance offices and super­vised by their respec­tive ser­vice, he added.

Vol­un­teer tax pre­par­ers are a mix of mil­i­tary mem­bers and civil­ians with tax expe­ri­ence or just a desire to help, Stone said. All vol­un­teers are trained and cer­ti­fied by the Inter­nal Rev­enue Ser­vice before they’re able to pre­pare tax­es.

“It’s a very pop­u­lar pro­gram,” he said. Last year, “we elec­tron­i­cal­ly filed over 250,000 returns.”

Peo­ple can locate their clos­est mil­i­tary legal assis­tance office through the Armed Forces Legal Assis­tance Legal Ser­vices Loca­tor at

Ser­vice mem­bers and their fam­i­lies also can take advan­tage of free, online elec­tron­ic tax fil­ing ser­vices through Mil­i­tary One­Source. The cus­tomized pro­gram offers free fed­er­al fil­ing and free fil­ing for up to three states.

Peo­ple can access the H&R Block at Home pro­gram by going to Mil­i­tary One­Source at and click­ing on “Tax Fil­ing Ser­vices.” For free tax-relat­ed phone con­sul­ta­tions, peo­ple can call the Mil­i­tary One­Source Tax Hot­line at 1–800-730‑3802 sev­en days a week from 7 a.m. to 11 p.m. EST.

The online pro­gram is open to active-duty Army, Navy, Marine and Air Force per­son­nel; Guard and Reserve ser­vice mem­bers regard­less of acti­va­tion sta­tus; as well as spous­es, depen­dent chil­dren and fam­i­ly mem­bers stand­ing in for a deployed ser­vice mem­ber.

Whether fil­ing in per­son or online, Stone sug­gest­ed peo­ple take advan­tage of the free advice offered at mil­i­tary tax cen­ters. “Even the sim­plest return may have issues or deduc­tions or cred­its that a per­son might not be aware of,” he said.

To ease the process, Stone sug­gest­ed peo­ple gath­er Social Secu­ri­ty cards, wage and earn­ing state­ments, inter­est and div­i­dend state­ments, last year’s returns if avail­able, bank account and rout­ing num­bers for direct deposit, and oth­er rel­e­vant infor­ma­tion pri­or to a tax appoint­ment. He also stressed the impor­tance of atten­tion to detail, not­ing that a com­mon error is for peo­ple to enter the wrong Social Secu­ri­ty num­bers on IRS forms.

For more on mil­i­tary-relat­ed tax laws, peo­ple should vis­it the Mil­i­tary One­Source web­site or the IRS web­site, which fea­tures a sec­tion for ser­vice mem­bers and their fam­i­lies.

U.S. Depart­ment of Defense
Office of the Assis­tant Sec­re­tary of Defense (Pub­lic Affairs)

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