Eight Tax Tips For Military Personnel
If you are an active military member, there is a specific Act enacted for you - Service members Civil Relief Act (SCRA).
This Act offers many benefits to military personnel on duty.
SCRA protection starts from the day you receive orders for active duty or a deployment.
In addition, IRS also provides some reliefs and credits to military taxpayers.
Here are eight important tax tips for military personnel: 1.
Exclusion of state income taxes for non-residential servicemen and women.
The state can't impose income taxes on these military personnel if they are working in that state on military duties.
Also, the state tax liability for the spouse of a service member can't be increased by including the Service member's income.
2.
A service member can delay the payment of his or her income tax if on active duty for up to 180 days after the termination of the duty.
3.
Death Gratuity - Full amount of such gratuity payment is non-taxable.
Generally an amount of $12,000 is paid as Death Gratuity to the survivor of the service member.
4.
Certain travel expenses - You can claim the travel expenses towards your military responsibilities as long as it involves a travel of 100 miles or more from your residence.
This deduction can be claimed directly on your form 1040 at line 24.
You need not claim it as a miscellaneous deduction on schedule A.
5.
Designating a person for your tax matters - You can designate a person to represent you in the matters of your tax return.
This representative can answer questions that IRS has about your return when you are on active duty or out of United States.
6.
Exclusions in tax - Many types of military pay and benefits are eligible for exclusion from income of military taxpayers.
You can deduct interest on mortgage and real estate taxes even though you have used BAH to pay these expenses.
The expenses which are paid to you as military benefit are excluded from your taxable income.
The combat zone pay is eligible for exclusion unless you are working as an officer.
In that case also, limits are provided for exclusion.
Legal assistance, dental care, and dependent care assistance are excluded from your W2 7.
Earned income credit (EIC) - If you have earned an income of $34,458 (if you have more than one child), or $30,328 (if you have one child) then you can claim the EIC.
A very important condition for military personnel is that they can't file Form 2555 - foreign earned income if they want to claim this credit.
Also your income from investment has to be less than $2650 for the year if you claim EIC.
There is one more relief given to military personnel - the condition of living in United States for 50 per cent of the tax year is waived for them.
If you are on an active duty and staying overseas, you are still assumed to have lived in the United States during that period.
8.
Child tax credit - If your child is by the end of the year under 17, and is a citizen of United States, and claimed as your dependent, then you can avail child tax credit of $1000 which is very useful to reduce your tax liability.
Even if your tax liability is $0, you can get this credit as a refund.
You must check your eligibility, as it will help you to generate a bigger refund for you.
This Act offers many benefits to military personnel on duty.
SCRA protection starts from the day you receive orders for active duty or a deployment.
In addition, IRS also provides some reliefs and credits to military taxpayers.
Here are eight important tax tips for military personnel: 1.
Exclusion of state income taxes for non-residential servicemen and women.
The state can't impose income taxes on these military personnel if they are working in that state on military duties.
Also, the state tax liability for the spouse of a service member can't be increased by including the Service member's income.
2.
A service member can delay the payment of his or her income tax if on active duty for up to 180 days after the termination of the duty.
3.
Death Gratuity - Full amount of such gratuity payment is non-taxable.
Generally an amount of $12,000 is paid as Death Gratuity to the survivor of the service member.
4.
Certain travel expenses - You can claim the travel expenses towards your military responsibilities as long as it involves a travel of 100 miles or more from your residence.
This deduction can be claimed directly on your form 1040 at line 24.
You need not claim it as a miscellaneous deduction on schedule A.
5.
Designating a person for your tax matters - You can designate a person to represent you in the matters of your tax return.
This representative can answer questions that IRS has about your return when you are on active duty or out of United States.
6.
Exclusions in tax - Many types of military pay and benefits are eligible for exclusion from income of military taxpayers.
You can deduct interest on mortgage and real estate taxes even though you have used BAH to pay these expenses.
The expenses which are paid to you as military benefit are excluded from your taxable income.
The combat zone pay is eligible for exclusion unless you are working as an officer.
In that case also, limits are provided for exclusion.
Legal assistance, dental care, and dependent care assistance are excluded from your W2 7.
Earned income credit (EIC) - If you have earned an income of $34,458 (if you have more than one child), or $30,328 (if you have one child) then you can claim the EIC.
A very important condition for military personnel is that they can't file Form 2555 - foreign earned income if they want to claim this credit.
Also your income from investment has to be less than $2650 for the year if you claim EIC.
There is one more relief given to military personnel - the condition of living in United States for 50 per cent of the tax year is waived for them.
If you are on an active duty and staying overseas, you are still assumed to have lived in the United States during that period.
8.
Child tax credit - If your child is by the end of the year under 17, and is a citizen of United States, and claimed as your dependent, then you can avail child tax credit of $1000 which is very useful to reduce your tax liability.
Even if your tax liability is $0, you can get this credit as a refund.
You must check your eligibility, as it will help you to generate a bigger refund for you.