Joining the military means changing your life. Frequent moves, new skills, and overseas deployments all come with the job description. Even taxes change for members of the Armed Forces. That’s why we’re providing military members tax tips.
Over the years, the government has created a number of provisions and perks intended to make life for military members less hard on them and their families.
Here are seven tips to help you make the most of them:
Pick the right tax preparer
Military members who want to file their own taxes should go to the government’s Military OneSource website. Eligible service members can file their taxes electronically on the site for free.
However, if you don’t want to prepare tax forms yourself, Steber advises military members to look for someone who has expertise in the area. Look for tax preparers who have experience filing returns for military members and know how to deal with things such as combat pay exclusion.
Extra time to file if you’re based in a combat zone
Those deployed to a combat zone get an automatic extension of 180 days to file their taxes after they are reassigned from the area. Also, military income earned while in a combat zone is not subject to taxes.
Select your home state carefully
Military members should choose wisely when it comes to selecting a place of residence for tax purposes. States with no or low income taxes have the potential to save families thousands of dollars.
Deduct your unreimbursed expenses
Like other workers, military members can deduct unreimbursed expenses related to their job that are in excess of 2 percent of their adjusted gross income. Also, reservists can take advantage of a special provision that allows them to deduct travel expenses without itemizing their return.
Know the rules on selling a house
Many military families have to move a lot. As a result, military families who bought a home may end up selling it before they’ve owned it for five years. Usually, that means any gains earned from the property sale would be taxable. However, the government has exempted military members from that five year requirement.
Understand your EITC eligibility
The earned income tax credit can refund eligible families thousands of dollars each year. To claim it, people must have earned taxable income, a requirement that could be difficult to meet for military personnel with only non-taxable income such as basic allowances and combat pay. However, the IRS has implemented special EITC rules for military members to allow them to specify combat pay as taxable. Doing this can result in an EITC refund. The IRS recommends military members calculate their taxes with combat pay being taxable and non-taxable to determine which option results in greater savings.
Keep updated on changes each year
The tax code can change every year. Current provisions may expire. New ones added all the time. For the latest updates, military members should look to IRS Publication 3, the Armed Forces’ Tax Guide. Military OneSource can also connect military members with consultants who may be able to answer questions on the latest changes.
If you have questions about paying taxes as a military member or other tax concerns, don’t hesitate to call experienced CPAs like Williams and Kunkel, CPA, LLP today in Flower Mound at 972-446-1040 to help.
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Source: U.S. News and World Report