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Preparing Your Military Tax Return Tax Tips for Military Families

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April 15 is Tax Day, which means tax season only has a little under two months to go. The key to a successful tax season is ample preparation in advance to make sure you aren't missing anything important. Read below for tips on how to make sure you have everything in order in these final weeks to prepare your military tax return, including which military tax exemptions to take advantage of, what paperwork you need, and how to file your taxes efficiently and stress-free. 

Extensions for Filing Deadlines

Military families have many time constraints they deal with when filing their taxes. The IRS recognizes this and provides you with multiple opportunities to extend your filing deadline for your 2019 military tax return.  

Form 4868 

By filing Form 4868, you are allowed a sixth-month extension when filing your military tax return. Just because you have filed for an extension doesn't mean you can pay late. Therefore you may face penalties if you choose to pay your taxes after the filing deadline. 

Two-Month Extensions

If you're serving outside of the United States, you can receive an automatic two-month extension if you need more time, file Form 4868 by June 15 to apply for an additional four-month extension. 

180+ Day Extensions

If you or your spouse is serving in a combat zone, a contingency operation outside the United States, or have a qualifying service-related injury outside of a combat zone, you can receive a 180-day extension after your last day or following your last day of hospitalization due to injuries sustained during any of the services previously listed. Additionally, you will receive any amount of time you had until your filing deadline before your service.  

Special Military Tax Exemptions

Many military families have multiple types and sources of income and from their active duty. When it comes to paying taxes, military members can claim quite a few tax advantages that aren't available to the average civilian. For tax purposes, it is important for you to understand the various types of pay and allowances that can be excluded from your gross income. Simply put, if the money is not included in your gross income, it cannot be included in your taxable income and, therefore, is not taxable.  

Combat Zone Exclusion

If you or your spouse are serving in a designated combat zone, you can exclude certain pay from your income. To be able to receive combat zone exclusion for the month, during that month you must have either served in a combat zone or have been hospitalized as a result of wounds, disease, or injury obtained while serving in a combat zone. You only need to serve in a combat zone for a one-day minimum in order to qualify for these military tax exclusions. 

Education Expenses 

If you, your spouse, or a dependent attended college last year, you may be eligible for another military tax exclusion. Expenses such as tuition and fees, room and board, and books, supplies, and equipment may qualify for the purpose of student loan interest deduction. These exclusions can be claimed by completing Form 8917 and submitting it along with Form 1040. 

Moving Expenses

If you have to move due to a permanent change of station, then you are entitled to some "reasonable" deductions. For every family, these deductions might look differently but could include packing and shipping costs, setting up or ending utilities, or storing and insuring household goods and personal items. Other deductions might include shipping your vehicle or pets or paying tolls. You can use Form 3903 to calculate your moving expense deduction and learn more about authorized and unauthorized expenses here

Retirement Contributions

You can usually deduct some portion of the contributions you make to your traditional retirement account for the year. However, if you or your spouse were covered by an employer-maintained plan at any time during the year, then not all of the deductions are considered eligible. 

Sale of a Home

The good news is you may not have to pay tax on all of the profit you have collected from the sale of your main home. A primary home is one that is defined as having been your primary residence for more than two years. You must have also owned this home for at least two years, which is determined through an ownership test. Your main home can be a house, a houseboat, a mobile home, a cooperative apartment, or a condominium. 

Travel Expenses

You can deduct work-related travel expenses that have not been reimbursed when you are traveling away from your permanent duty station. This deduction is applicable when you are away from your station for longer than an ordinary workday. Eligible expenses include business-related meals, lodging, laundry, and business phone calls. You can also deduct the cost of travel from one workplace to another, when attending a business meeting away from your regular workplace, or when you travel overnight. 

Uniform Allowances

Initially, your uniform allowance gets excluded from your gross pay. However, you may be able to write off some of the cost of some uniforms. If you cannot wear your uniform while off-duty, the IRS allows you to deduct the costs of purchasing and maintaining those uniforms. 

Handy Paperwork 

Like any experience you've had at the DMV, you know filing taxes requires a lot of necessary paperwork. Here are a few items you will need to file your 2019 active duty military tax return: 

  • W2/1099 obtained from the Defense Finance and Accounting Service
  • Your Military ID
  • You and your spouse's Social Security Numbers
  • Information about your deductions and credits 
  • Bank accounts and routing information
  • Last Year's tax return
  • Any documents for investments or rentals  

Filing Your Military Tax Return

More good news for you! Over the years, plenty of tax-related resources have been developed for military families. A few resources include MilTax, TurboTax, and the IRS website. Military One Source has teamed up with MilTax, online tax preparation, and a filing platform. TurboTax now offers a military discount on their tax filing software, and the IRS has dedicated a whole section of their website to filing taxes the old way - by hand.

Regardless of how you file your active duty military tax return, make sure to note the deadline to file for 2020 (without any extensions) is March 15.

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