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This article has been updated for the 2018 tax year.
When you or a spouse serve as an active military member, you’re entitled to the same tax benefits available to civilians — plus, you may be eligible for some special tax considerations too.
Being a member of the armed forces means you’re able to take advantage of special tax breaks. Let’s look at tax tips for military families that could improve your odds of getting a refund.
You could get an extension of your filing deadline
Military families have special demands on their time, from across the country or the globe, to serving overseas or in combat zones. The IRS recognizes special circumstances can make it challenging for military service members and their families to meet tax filing deadlines.
You may have multiple opportunities to extend your filing deadline, including:
- Regardless of military status, you can get a six-month extension by filing Form 4868. Keep in mind that filing for an extension doesn’t mean you can pay late, it simply gives you more time to file your return. Interest will apply and you could face penalties if you choose to pay your taxes after the filing deadline.
- If you’re serving outside the U.S., you can get an automatic two-month extension. If you need another four months, just file Form 4868 by June 15.
- If you or your spouse is serving in a combat zone, a contingency operation outside the U.S., or have qualifying service outside a combat zone, you can get the lengthiest possible extension. Initially, you have 180 days after your last day in a combat zone, contingency operation of other qualifying service, or following your last day of hospitalization because of injuries sustained during your combat, contingency or qualifying duty. Additionally, any amount of time you had until your filing deadline before you entered the combat zone, contingency operation or other qualifying service gets tacked on to your 180-day extension. For example, if you began your special service three months before the tax filing deadline, your new deadline is the 180 days plus three months.
Other situations and circumstances may also entitle you to a filing extension because of your military service. Check out the IRS’ Armed Forces Tax Guide to learn more.
Gross income for military families
Military families typically have multiple types of income and allowances from their active duty. Not all the money you receive for your services is considered gross income. Money that’s not included in your gross income is money that can’t be included in your taxable income — which means you can’t be taxed on it.
Some items that are included in gross income are:
- Basic pay (the money you get for your active duty)
- Special pay (such as special duty assignment pay)
- Bonus pay (for example, the bonus you get for enlisting or reenlisting)
- Incentive pay (such as pay for taking on hazardous duty)
- Other pay (such as accrued leave)
- In-kind military benefits (such as personal use of a government-supplied vehicle)
The items below are typically not included in gross income, but you may still have to report them on your income tax return:
- Combat pay (compensation for active service while in a combat zone)
- Certain educational expenses for dependents
- Uniform allowances
- Housing and cost-of-living allowances abroad paid by the U.S. Government or by a foreign government
- Certain moving and travel allowances
- Medical and dental care benefits
There are many more on each list. For a full list, check out the IRS’ Armed Forces Tax Guide.
Tax breaks for military families
In addition to benefiting from the same tax benefits as civilians, your military status gives you added benefits at tax time. Let’s look at some of the specific military-related tax benefits, as well as other ways to save on taxes.
Combat pay exclusion
Combat zone pay is partially or fully tax-free. The same goes in some cases for those who serve in support in a combat zone.
To be eligible, you must receive special pay for duty “subject to hostile fire or imminent danger” that’s certified by the Department of Defense. You must also meet one of three options:
- Option 1: You serve in an active combat area designated by executive order.
- Option 2: You serve in a Department of Defense-designated support area “in direct sustainment of military operations in the combat zone.”
- Option 3: You serve in a Department of Defense-designated contingency operation.
See a full list of what’s considered recognized combat zones.Learn more about the combat zone exclusion
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Earned Income Tax Credit
You can include nontaxable combat pay in your taxable income total. Why would you want to add something that’s not taxable? It can help increase your Earned Income Tax Credit, which could mean you owe less tax. The result could be a larger refund.
Your nontaxable combat pay will be on Form W-2 in box 12 with code Q.
Your EITC may increase or decrease when you add combat pay, so you should run the numbers to see whether you want to add nontaxable combat pay to your taxable income. Whether it increases or decreases depends on your total earned income, filing status and number of qualifying children.
Find the EITC eligibility amounts on the IRS site.
One factor to be aware of – claiming the EITC could delay your tax refund. That’s because federal law requires the IRS to wait until at least mid-February before issuing a refund to anyone who claims this credit.Learn more about the earned income tax credit
Moving expense deduction
The Tax Cuts and Jobs Act did away with allowing civilians to deduct unreimbursed moving expenses. But as active-duty military, you can still deduct moving expenses as long as your move is for a permanent change of station.
It’s considered a permanent change of station if the move is your first post of active duty, a move from one permanent post of duty to another, or a move from your last post of duty to your home or a nearer point in the U.S.
If you qualify for the moving expenses deduction, you’re limited on what you can deduct, such as:
- Packing and shipping costs
- Connecting and disconnecting utilities
- Storing and insuring household goods and personal items within 30 days from when your possessions are moved from your former home
- Shipping your car and household pets
- Mileage and tolls if you drove to your new home during the move
The IRS suggests deducting only “reasonable expenses.” In other words, don’t put down the detour you took to sightsee when moving to your new residence. Instead, put down the direct mileage.
You also can’t deduct expenses for moving services the government provided to you, or that were reimbursed by an allowance you didn’t include in your income.
Use Form 3903 for your moving expenses.
Travel deduction for reservists
Members of a reserve component of the armed forces can be eligible for a travel expense deduction. To qualify for this deduction, the unreimbursed travel expenses must be related to your reservist duties that require you to travel more than 100 miles from home.
You would report this by using either Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. You also enter that amount on Form 1040, line 24, the portion of your expenses, up to the federal rate, included on Form 2106, line 10, or Form 2106-EZ, line 6.
Then, subtract the amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21.
Not only does your uniform allowance get excluded from your gross pay, you may also be able to write off some of the cost of some uniforms. If you have uniforms you can’t wear when off duty, the IRS allows you to deduct the costs of buying and maintaining those uniforms. But you’ll need to reduce the deduction by any nontaxable allowance or reimbursement you already got for the uniforms.
Education expenses deduction
Serving in the military might mean you need to take classes. That education can be tax-deductible.
You’re able to deduct unreimbursed costs related to qualifying work-related education, even if the education could result in a degree.
To take advantage of this deduction, the education must be required by your employer or law to keep your present salary, status, or job, or must maintain or improve skills needed for your work. The education isn’t eligible if it’s needed to meet minimum educational requirements for your trade or business or is part of a program of study that allows you to qualify for a new trade or business. Read more here.
Filing taxes when you’re serving overseas
Choosing the filing status of married filing jointly can afford you some tax benefits. But joint returns usually need both signatures. What do you do when you or your spouse are serving overseas? There are ways around it if you’re serving in the military.
If you’re serving in a combat zone, your spouse can sign for you and attach a signed statement to the form explaining the situation.
If you’re overseas or in a combat zone, you can also file Form 2848 that designates your spouse to sign the return in your absence. Alternatively, you could designate your spouse to have power of attorney so that your spouse can sign forms in your absence.
Your or your spouse’s military service doesn’t just earn you the gratitude of the country you serve, it also qualifies you for some special considerations when filing your tax returns. In addition to access to the same tax opportunities given to civilians, you also benefit from military-specific tax deductions and considerations.
Credit Karma Tax® can help you file your own taxes and itemize deductions for simple tax returns. However, if your situation is complicated, or you need to file tax returns in multiple states, check with your base for help. Most military bases provide free on-site tax preparation assistance for military families.