What Publication 3 Covers
Publication 3 is written for people serving in the U.S. Armed Forces. That includes commissioned officers, warrant officers, and enlisted personnel in regular and reserve units, as well as the Coast Guard and Space Force. Members of the Merchant Marine and American Red Cross aren’t part of its definition of the Armed Forces.
The guide has limits. It doesn’t cover military pensions or veterans’ benefits, and it skips basic rules that apply to all taxpayers.
Key Military Tax Breaks in the IRS Guide
Some military pay isn’t included as taxable income and is tax-free through an exclusion. One exclusion covers combat pay. A combat zone is an area designated by executive order for U.S. combat operations, and current combat zones are tracked by the IRS.
| Pay or benefit | Tax treatment |
|---|---|
| Combat zone pay for enlisted members and warrant officers | All qualifying pay can be excluded |
| Combat zone pay for commissioned officers | Exclusion is capped each month at the highest enlisted pay rate plus imminent danger/hostile fire pay |
| Basic Allowance for Housing (BAH) | Nontaxable |
| Basic Allowance for Subsistence (BAS) | Nontaxable |
Serving any part of a month in a combat zone counts as serving the whole month. Excluded combat pay is still subject to Social Security and Medicare taxes. You’ll find it in Box 12 of your Form W-2, marked with code Q.
Excluded combat pay also affects tax credits. Earned income is money you get from working, such as wages. Under the military EITC rules, you can count nontaxable combat pay as earned income if that gives you a larger earned income tax credit. This is true even though the combat pay is excluded from your taxable income.
Extra Time to File
Most people file during tax season and face the April 15 deadline. Military members can get additional time to file in two situations.
Serving in a Combat Zone
If you serve in a combat zone or contingency operation, your combat zone extension lasts at least 180 days after you leave. You also add the days that were left in the filing period when you entered. For example, if 45 days were left in the filing period when you entered, you’d get at least 225 days after leaving.
Stationed Outside the U.S.
If you’re stationed outside the U.S. and Puerto Rico on the due date, you get an automatic 2-month extension to file. You don’t need to submit Form 4868, the usual extension request. Interest still applies to any tax you haven’t paid by the due date.
Deductions for Moves and Reserve Travel
A deduction lowers the amount of income you’re taxed on. Publication 3 explains two deductions tied to military service.
Permanent Change of Station Moves
A permanent change of station (PCS) is a military order to move to a new duty station. Under the IRS military moving expense rules, active-duty members moving because of a PCS can deduct unreimbursed qualified moving expenses. Unreimbursed means the military didn’t pay you back. You claim them on Form 3903.
Reserve Travel
Reservists who travel more than 100 miles from home for reserve duty can deduct unreimbursed travel expenses. Reservists report qualifying unreimbursed travel expenses on Form 2106 (Employee Business Expenses), which then flows to Schedule 1 (Form 1040).
