Federal Income Tax for Members of the Armed Forces

There are various tax laws that provide special benefits for members of the United States Armed Forces.  For purposes of these tax laws, a member of the United States Armed Forces includes personnel in the Army, Navy, Air Force, or Coast Guard, whether that person is an officer or enlisted.

The following tax benefits apply to members of the United States Armed Forces whether on active duty or deployed to a combat zone.

Credit for first-time homebuyers.  If you are a member of the military, you can receive a tax credit related to the purchase of your first home if you entered into a contract by April 30, 2011, and closed on the purchase of the home by June 30, 2011.  The tax credit is for up to $6,500.

In addition, persons who were long-term homeowners may also qualify for this tax credit if they lived in the same home for any five consecutive years out of the previous eight years.

This tax credit begins to phase out for individual taxpayers with an adjusted gross income between $125,000 and $145,000 or for joint taxpayers between $225,000 and $245,000.

Military Family Tax Relief Act.  Since 2003, military personnel and their families receive the following tax breaks:

  • Death benefit.  The family of a deceased member of the Armed Forces receives $12,000 tax free.
  • Sale of home.  A member of the Armed Forces on duty may delay for up to 10 years the counting of the five consecutive year ownership requirement for receiving the credit for first-time homebuyers.
  • Travel deduction for Reserve and National Guard Members.  A member of the Reserve or National Guard may deduct travel expenses (e.g., food, lodging, transportation) that are not reimbursed when they relate to their Reserve or National Guard responsibilities and require an overnight stay at least 100 miles away from home.
  • Homeowner Assistance Program.  Payments made to offset the loss in home value related to military base closure or relocation are not taxable.
  • Contingency operation extension to file.  The extension for filing a federal income tax return granted to members serving in combat zones is granted to those serving in contingency operations.
  • Dependent care benefits.  Dependent care benefits for military personnel are not taxable.
  • Tax on tuition payments.  Funds from Qualified Tuition Program and Coverdell Education Savings Accounts used to attend the United States Military, Naval, Air Force, or Coast Guard academies are not taxable.

In addition, members of the United States Armed Forces serving in a combat zone receives the following additional tax benefits.

  • Military pay exclusion.  For any month where you serve in a combat zone, all of your income for that month is not taxable up to the allowed limit for that tax year.  This includes any months when you are hospitalized related to injuries received in a combat zone for up to 24 months.
  • Extension of tax actions.  Your deadline to file your federal income tax return or perform any any time-sensitive tax action is extended by the length of time you serve in a combat zone plus 180 days.

Keep in mind that the information above is general in nature and you should verify the current tax laws applicable to those in the military, as such laws are subject to change.  If you are a member of the military and you have questions about the special tax laws for which you qualify or how to file your federal income tax return, you can speak with a tax attorney.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.