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Military Tax Deductions


When paying taxes, many people don’t spend the time and energy that is required to itemize their return. Itemized deductions can save you a great deal of money if you are in the military. This is done using Schedule A of IRS Form 1040.

To get the most out of your deductions, seek some help from your local Armed Forces Tax Council (AFTC) offices or Volunteer Income Tax Assistance Office. VITA us available if your income is below $49,000. Using AFTC is very useful because these tax specialists are versed in the sections of the tax code that apply to military members. You can also take advantage of Free File, a free online tax filing service available through the IRS website.

There are many military-specific itemized deductions that you might be able to take. A good way of understanding these deductions is to look at your job in the military as your own business for tax purposes. In other words, what do you need for your business (the military) that you wouldn’t otherwise have to pay for out of your own pocket? If these items are used exclusively for your military service and the government does not pay for them for, they are probably deductible. A good example of the deductible rule is restricted and special uniforms. These are deductible while regular uniforms are not.

Travel and expenses related to service from home are usually deductible. Travel to Reservist meetings requiring more than one day’s travel and military medical care are also deductible as are “no cost” assignments and travel to temporary work locations and places of required educational courses. Unpaid moving and relocation expenses are another common deduction on military tax returns.

Local, state and foreign taxes are also deductible. Some types of property and sales taxes are deductible. Interest paid on mortgages, home equity lines and student loans is usually deductible.

If you are a student, you or your parents can take advantage of the American Opportunity Credit (up to $2,500 per student), the Lifetime Learning Credit ($2,000-$4,000) and the Tuition and Fees Deduction (up to $4,000 per student). The Tuition and Fees Deduction cannot be used in conjunction with the American Opportunity or Lifetime Learner’s Credit. Educational and training courses required for work (such as continuing education) are deductible.

The "Making Work Pay" Credit — also known as Earned Income Credit — allows military members to claim the credit for combat pay even if they haven’t paid taxes on the money. To take this credit, you will need to fill out schedule M.

There are also child care credits, credits for charitable donations, medical expenses, small business expenses if your spouse has a business and many other types of deductions. Every service member’s situation is different which is why it is a good idea to take advantage of VITA or AFTC. The IRS has finally produced a legible document explaining all of this and it is current and applicable for 2010 taxes and can be found at: http://www.irs.gov/publications/p3/ar02.html#en_US_2010_publink1000176240

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