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NEW YORK (Reuters) – No matter how U.S. tax policies evolve in the future, it is doubtful that members of the U.S. military will ever be able to file tax returns on a postcard. Their jobs simply make it too complicated.
Christian Schleider, an Army helicopter pilot stationed in Fort Bragg, North Carolina, filed taxes from so many different locations during 15 years in the military that he can hardly name them all. His personal situation also shifted from post to post: he is now married, with kids and a real estate LLC on the side.
Most military members qualify for free tax help from the Volunteer Income Tax Assistance (VITA) program run by the Internal Revenue Service. There are also independent specialists like Marti Myers-Garver, based in Iowa, who runs a national service called Armed Forces Tax (armedforcestax.com).
TurboTax has special prompts for military members, and those of certain ranks or income levels can file free.
These are main areas where military taxes differ from civilian:
– What counts as income
Schleider cautions his young soldiers to keep a close eye on their leave and earnings statements – the military version of a pay stub.
While a W-2 will show gross earnings and taxes paid, the monthly military statement will break down combat pay and which states took out withholding. This is important because combat pay is not taxed as income, while regular pay is.
Schleider said he had trouble in the past when he got back from a combat zone. The government did not resume taking taxes out of his pay, and then took it out all at once. “It was a bit of a shock,” he said.
While that situation is not common, Myers-Garver always asks her clients for a year-end leave and earnings statement, in addition to a W-2, to make sure she can see all the details of what has been paid and to whom.
*Where and when to file
Establishing a state of residence is an important tax choice. If you can establish residency in a state with no income tax, like Texas, Florida or Nevada, you can save thousands of dollars a year.
For those that enlist from high-tax states, request a change with the finance office if you switch to a post in a state that is more advantageous. The ones who choose not to might be planning to retire back in their home state or they want their children to go to college in that state’s system, Myers-Garver added.
Where a military spouse files taxes for their income is even more complicated. When it comes to figuring out those permutations, it is best to seek specialized help, Myers-Garver said.
Deadlines also vary for those in combat zones, because they can qualify for extensions automatically. But many forego that perk. “They don’t want an extension, they want their refund,” said Myers-Garver, noting that many service members qualify for the Earned Income Tax Credit.
Finally, a spouse can sign a return for a service member in a combat zone without needing a special power of attorney.
– What deductions count
The two items that come up the most for military members: uniforms and moving expenses.
The deductibility of uniforms used to vex Myers-Garver, but the 2018 tax changes eliminate unreimbursed employee expenses.
However, unreimbursed moving expenses for military members made it through as an exclusion, even though civilians can no longer claim these expenses as a deduction.
Josh Andrews, director of military life advice for USAA, the credit union and financial services firm that specializes in customers with a military connection, said the two items most claimed are moving a pet and second car.
A pro-tip from Andrews: If you are moving close to tax time, be sure to carry your tax documents with you.
Schleider wishes his younger self knew more about taxes, because he spent a lot of money moving a dog to Germany and back years ago, but never thought to claim the expense.
Editing by Lauren Young and David Gregorio