When I was deployed to Iraq, there was one lesson that was continually repeated: don’t become complacent. If one were to “wing it,” one could be injured or even lose their life. I’ve carried this lesson with me even long after my time in the battlefield. Why? Although my circumstances today aren’t nearly as life-threatening, it’s important to be diligent with life matters that carry important stakes – like your financial life.
If there’s one area I want to make sure I get right, it’s paying my taxes. Luckily, there are a plethora of tax tips that will help you save money on your taxes if you’re currently in the military. Here are some of those tips plus a few more pointers:
1. You can deduct your moving and travel expenses
If you’re in active duty service and your duty location is changed, there’s good news for your taxes: you may deduct the “reasonable unreimbursed expenses” of moving yourself and your family. If you’re married, you may be reimbursed 95% of the standard considered cost of the move of the family. Still, that’s very good news!
If you are a member of the reserves and you’re required to travel more than 100 miles away from home for your service, you can deduct your unreimbursed travel expenses on your return as an adjustment to income rather than as an itemized deduction – you’ll get more bang for your buck, as a result.
2. Combat pay is not taxable
That’s right, you don’t have to include combat pay as taxable income. Simple as that. But remember, this is just for combat pay. If your family is bringing in money elsewhere, it will most likely be subject to taxation.
While you don’t have to include combat pay as taxable income, it could provide a boost when calculating your Earned Income Tax Credit (EITC) if combat pay was your only income during 2015. By including combat pay when calculating the credit, you avoid reporting no earned income and not qualifying for the EITC. You’re required to include all or none of your combat pay when calculating the EITC – you can’t include just part of it.
3. You don’t need a 1095-B or 1095-C to file your taxes
The Affordable Care Act requires that you report your health insurance status on your taxes – if you don’t have minimal essential coverage, you may face a tax penalty. If you and your family have insurance through the military, including TRICARE , VA or other options, you may receive a 1095-B or 1095-C form(s) in the mail or electronically detailing the coverage. You do not need these forms to file, just check it for accuracy and keep it for your files.
4. Deadlines are extended for those serving in combat zones
If you or your spouse file jointly and you are serving in a combat zone, you get an automatic 180-day IRS extension for filing your tax return and paying taxes. The 180-day extension begins after you return from a combat zone. The automatic extension also applies to making qualified contributions to an IRA. Keep in mind, this exception does not apply to Social Security and Medicare taxes.
Don’t forget to use common sense when preparing your taxes. When you’re on active duty, probably the last thing you want to think about is your taxes. But it doesn’t have to be hard. Talk with other service members about taxes if you’re new to this. Their input can save you time and money. Also, TurboTax looks for tax deductions specific to military families and walks tax filers through military-related tax situations including state of residence, uniform deductions and PCS.
For service members in ranks E-1 to E-5, you can file both your federal and state taxes for free with the TurboTax Online Federal Free Edition or Online Deluxe offerings. For guidance around investments, rental properties or small business income and deductions, TurboTax is also offering $5 off or more for Online Premier and Home & Business. Senior enlisted personnel ranks E-6 to officer also are included within the discount, and will receive $5 or more off all TurboTax online federal products.
With a little time and patience, you can take advantage of the benefits afforded to you by your loyal service to the military.
Jeff Rose, CFP(R) is a combat veteran, financial advisor, and an avid blogger at GoodFinancialCents.com where he writes about financial topics relevant to the young and old alike. Jeff lives in Illinois with his wife and three sons.