Exclusive Tax Deductions for Military Service Members

With over 2 million personnel, including 1.1 million active-duty service members stationed domestically, the United States boasts the world’s seventh-largest military. However, service members often face unique tax challenges, navigating unclear guidelines about the deductions they’re eligible for. This confusion can result in missed opportunities, higher tax bills, and added stress, especially during deployments or frequent relocations.

This article highlights the key tax deductions available to military personnel, helping you to potentially maximize savings and avoid common pitfalls. With the right knowledge, service members can make tax season simpler and more beneficial.

What are military tax deductions?

Military tax deductions are specific expenses that service members can subtract from their income to reduce their taxable earnings. These deductions are designed to offset the unique costs incurred while serving in the armed forces and supporting their families. Understanding these deductions is key to maximizing tax savings.

Are military expenses tax deductible?

Not all military expenses are automatically deductible, but certain out-of-pocket expenses incurred as a result of your service may qualify for tax deductions. These are typically expenses that are necessary and directly related to performing your military duties.

Unreimbursed Travel Expenses: If you are required to travel for work but don’t receive reimbursement, you may be able to deduct things like lodging, meals, and transportation costs.
Home Office Deduction: In limited cases, if you are required to maintain a home office for military-related duties, you might qualify for a deduction.

Types of military tax deductions

Here are some of the most common tax deductions available to military personnel:

Standard Deduction vs. Itemized Deductions

Military members can choose between taking the standard deduction (a set amount based on your filing status) or itemizing deductions (if it results in a higher benefit). For many service members, itemizing can help account for expenses like moving costs and unreimbursed travel.

Tax-Free Combat Pay

If you’re deployed in a designated combat zone, the pay you earn while serving in that area is typically not taxable. This can result in significant tax savings, depending on your income level and the length of your deployment. Combat pay exclusions can reduce your overall taxable income, leaving more in your pocket.

Moving Expenses for Permanent Change of Station (PCS)

Military members who receive orders to move (PCS orders) can deduct certain expenses related to relocating, including moving company costs, travel, and lodging. This deduction can help offset the financial burden of frequent moves.

Are uniforms tax deductible?

Yes, under certain conditions, military uniforms are tax deductible. If you are required to purchase and maintain a uniform that is not suitable for everyday wear, you can claim the costs as an expense.

Deductible Uniform Costs: This includes the cost of uniforms, dry cleaning, and alterations.
Non-Deductible Costs: Uniforms that are suitable for everyday wear (such as a camouflage-pattern jacket that could also be worn casually) are not deductible.

Mastering tax deductions for military service

The U.S. tax code provides a range of tax benefits specifically designed for military members. These benefits can reduce your taxable income, resulting in lower taxes owed or higher refunds.

Combat Zone Tax Exclusion: Income earned in a designated combat zone is not subject to federal income tax.
Tax-Free Allowances: Allowances for housing (BAH), subsistence (BAS), and family separation may be exempt from federal taxes.
Earned Income Tax Credit (EITC): Service members can claim the EITC, which can result in a larger refund for lower-income military families.

Looking for more guidance on your military benefits? Discover A Simple Guide to Veterans & Military Benefits.

How military service affects taxes

Military service can have a significant impact on your taxes. Depending on where you’re stationed, whether you’ve served in a combat zone, and your overall pay, your tax situation will differ from that of a civilian. Here are key factors to keep in mind:

Combat Pay Exclusion: As mentioned earlier, if you serve in a combat zone, your income earned during that time is tax-exempt.
State Residency Issues: If you’re stationed in a different state from where you live, you may still be considered a resident of your home state for tax purposes, potentially making you eligible for state tax exemptions or credits.
Deployment-Related Tax Deadlines: Military members serving in designated combat zones or hazardous duty areas may qualify for extended tax filing deadlines.

Do military members get tax breaks?

Yes, military service members do receive several tax breaks that can help reduce their overall tax burden. These breaks are designed to acknowledge the sacrifices made by service members and their families.

Special Tax Breaks for Combat Zones: As mentioned, combat pay is typically not taxed, and you may be eligible for a variety of other tax breaks during active service in a combat zone.
Deduction for Reservists: If you’re a member of the Reserves, you may be able to deduct unreimbursed travel expenses related to training, including mileage and meals.

Can a military member deduct unreimbursed travel expenses?

Active-duty military members who incur travel expenses while on duty may be eligible to deduct them, provided the expenses are not reimbursed by the military. However, veterans who are no longer on active duty are generally not eligible for these travel deductions, although there may be some exceptions for medical travel expenses related to VA care.

Here’s a breakdown:

Active-Duty Military Personnel

Travel expenses for official duties (such as temporary duty assignments or training) that are not reimbursed by the military can be deducted.
This includes lodging, meals, transportation, and other related expenses while on official military travel.

Veterans

Travel expenses for veterans (after they’ve left active duty) are not typically deductible in the same way as they are for active-duty service members.
Veterans who are no longer serving cannot claim deductions for travel related to military duties, as they are not incurring those expenses in the course of military service anymore.

Exceptions and other deductions that could apply to veterans

Travel expenses related to receiving medical care from a VA hospital or clinic can sometimes be deductible.
Mileage deductions for travel related to VA medical appointments are often available.
Veterans with service-connected disabilities may also qualify for other specific tax benefits, such as disability-related deductions.

How to claim military tax deductions and write-offs

In addition to the deductions mentioned above, there are a few other tax write-offs available to military service members. These can further reduce your taxable income.

Student Loan Interest Deduction: If you’re paying off student loans while serving, you can deduct up to $2,500 of interest on your student loans, subject to income limits.
Education Benefits: The GI Bill and other education-related benefits can also impact your taxes, especially if you use them to pay for school-related costs.

How do military pay allotments affect my tax deductions?

Military pay allotments—automatic deductions from your paycheck—don’t generally affect your taxable income. However, if you use these allotments to contribute to tax-deferred accounts like retirement savings plans (e.g., Thrift Savings Plan), they may reduce your taxable income for the year.

Tax-Deferred Savings: Contributions to retirement accounts or certain other savings plans are not taxed until you withdraw them, potentially lowering your tax bill now.
Non-Taxable Allotments: Some allotments, like those for life insurance or health benefits, may be tax-free, depending on the circumstances.

How to file military tax claims for deductions or refunds

A military tax claim typically refers to a service member’s efforts to claim military-related tax benefits or file for a refund on overpaid taxes. These claims might arise if you qualify for additional deductions or credits after filing your tax return.

Combat Pay Claims: If you didn’t initially exclude combat pay from your taxes, you can file an amended return to claim the exclusion.
Refunds for Overpaid State Taxes: If your home state doesn’t offer tax exemptions for military service, you can claim a refund for any taxes that were incorrectly withheld.

Is military disability income taxable?

Military disability pay is generally not taxable, provided it is related to injuries sustained in the line of duty. However, there are some exceptions, depending on the specific nature of your disability.

Non-Taxable Disability Pay: Disability payments for service-connected injuries are typically not taxed by the federal government.
Taxable Disability Pay: If you receive disability benefits from the Department of Veterans Affairs (VA), those benefits are usually not taxable. However, if you receive disability pay from the military for non-service-related conditions, it may be subject to tax.

Navigating taxes as a military service member can be complex, but understanding the deductions and benefits available can help you reduce tax burden and maximize savings. Whether an individual is stationed domestically or deployed abroad, knowing what you can and can’t deduct is key to making the most of your financial situation. Always consult with a tax professional familiar with military tax laws to ensure you’re taking full advantage of your entitlements.

FAQs on tax deductions for military service members

Can I claim military travel expenses if I’m on a temporary assignment?

Yes, if you’re an active-duty service member and incur travel expenses for temporary duty assignments or training, you can claim unreimbursed travel expenses as tax deductions. This includes costs for lodging, meals, and transportation.

Can I deduct student loan interest as a service member?

Yes, you can deduct up to $2,500 in student loan interest payments if you’re paying off loans while serving in the military. The deduction is subject to income limits, and it applies whether you are on active duty or a reservist.

Are military dependents eligible for any tax benefits?

While military dependents are not directly eligible for tax deductions, certain allowances (such as housing and subsistence allowances) may be tax-exempt. Additionally, tax benefits related to childcare or earned income may apply to military families based on income and filing status.