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Understanding Military Taxes
Being part of the military personnel or a veteran has unique financial circumstances, much of which also crucially affect tax planning. The United States tax system has provisions specifically tailored to accommodate the unique situations that the brave men and women of the military face. Brightside Tax Relief, a leading nationwide tax relief company, aims to make navigating military taxes less daunting for you with some essential tax tips.
Military Tax Basics
The basic principle that applies to military taxes is that active-duty military personnel should pay taxes to their state of legal residence. They do not have to pay income tax to the state where they are stationed unless it happens to be their state of legal residence. Veterans are similar to civilians in terms of tax responsibilities with some exclusive benefits. For those deployed in certain recognized combat zones, the Internal Revenue Service (IRS) exempts the pay they receive during any part of any month while serving.
Understanding Tax-Free Combat Pay
As specified by the IRS, enlisted military personnel, warrant officers, and commissioned warrant officers can exclude from gross income their armed forces active-duty or reserve pay for service in a combat zone. Commissioned officers other than commissioned warrant officers can exclude their pay up to the highest enlisted officer’s pay plus imminent danger or hostile fire pay. This exclusion also voyages to the family in the unfortunate incident of the serviceman’s death. Helpfully, the IRS provides comprehensive information on combat zones where such pay exclusion applies.
Avail Extension in Filing Deadlines
Servicemen and women might frequently be unable to meet tax deadlines due to the nature of duties. Filing deadlines are automatically extended for individuals serving in combat zones or contingency operations. Similarly, veterans who are hospitalized as a result of injury received in a combat zone get the same extension.
Claim Your Tax Credits
Various tax credits can ease your military tax burdens. The Earned Income Tax Credit can be an essential relief option for low to moderate-income military families, potentially reducing the tax you owe and possibly leading to a refund. The Child and Dependent Care Credit is accessible for costs related to the care of children under 13 or disabled dependents to allow you or your spouse to work or look for employment.
Utilize the Free Tax Help
Majority of military bases offer free tax preparation and filing assistance, primarily through Volunteer Income Tax Assistance (VITA) offices. These offices have IRS-trained volunteers, conversant with the nuances of military taxes, who can help prepare basic tax returns for free.
Deductible Expenses
For Armed Forces reservists, unreimbursed travel expenses for attending reserve-related functions are deductible. Expenses related to moving and travel can be deducted while changing permanent station orders. Military service personnel can also deduct the cost of uniforms if regulations prohibit wearing them off duty.
Rethink State of Residency
Military personnel gets to maintain a legal residence or domicile for tax purposes in a state even if the service moves them to another state. If you’re residing in a state with high taxes, it might be worth establishing residency in a state with lower taxes. Consult a tax professional to understand whether this could be beneficial for you.
Grasping The Tax Break for National Guard and Reservists
If a member of the National Guard or military reserve travels more than 100 miles from home and is away overnight for a drill or a meeting, they can claim a tax deduction for unreimbursed travel costs.
Understanding The Retired Pay
Most military retired pay based on service-related disabilities is considered taxable income, but certain members of the military and veterans may be eligible for certain tax exclusions.
Navigating military taxes can be a herculean task due to the presence of numerous exclusive provisions and benefits. But, with the right support and guidance, like that from Brightside Tax Relief, this process can be streamlined. Make sure you take advantage of the numerous benefits offered under military taxes and ensure compliance with your obligations in the most efficient manner possible.
