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10/28/2009 |
Member News |
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Basic Tax Tips For Military Audience |
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Did you know . . .?
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While basic pay and most forms of special pay (hardship duty pay, hostile fire pay, special duty assignment pay, and incentive pay) for service in the active or reserve forces are taxable, Congress and the IRS provide that many types of military pay and benefits are not taxable.
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Here is a list of common military pay items and benefits that are not taxed (whether they are received as an expense reimbursement or an allowance):
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Living Allowances
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Basic Allowance for Housing (BAH)
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As an added benefit, you can still deduct mortgage interest and real estate taxes on your home even if you pay these expenses with your BAH.
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Basic Allowance for Subsistence (BAS)
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Housing and cost-of-living allowances abroad whether paid by the U.S. Government or by a foreign government
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Overseas Housing Allowance (OHA)
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Moving Allowances
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Dislocation
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Base realignment and closure benefits
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Move-in housing
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Moving household and personal items
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Moving trailers or mobile homes
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Storage
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Temporary lodging and temporary lodging expenses
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Travel Allowances
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Combat Zone Pay
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This is an exception to the general rule that basic military pay is taxable. Compensation for active service while in a combat zone or a qualified hazardous duty area is not taxable.
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Commissioned officers may not be able to exclude all their combat pay.
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Under a special provision you can choose to include combat pay in your “earned income” which is used to determine the amount of your EIC. This election may increase the amount of your EIC.
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Family Allowances
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Separation
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Certain educational expenses for dependents
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Death Allowances
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Burial services
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Death gratuity payments to eligible survivors
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Travel of dependents to burial site
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Other payments
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Uniform allowances
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Uniforms furnished to enlisted personnel
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Group-term life insurance
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Disability
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“In-kind” Military Benefits
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Dependent-care assistance program
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Legal assistance
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Medical/dental care
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Military disability pensions from a service-connected disability
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There are also several provisions which exclude many forms of veterans’ benefits which are administered by the Department of Veterans Affairs (VA). Here is a list of amounts paid to veterans or their families that are not taxable:
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Education, training, and subsistence allowances (for example, GI Bill benefits)
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Disability compensation and pension payments for disabilities
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Grants for homes designed for wheelchair living
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Grants for motor vehicles for veterans who lost their sight or the use of their limbs
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Veterans’ insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran’s endowment policy paid before death
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Interest on insurance dividends left on deposit with the VA
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Benefits under a dependent-care assistance program
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The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001
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Payments made under the compensated work therapy program
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Any bonus payment by a state or political subdivision because of service in combat zone
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