Tax Deductions And Allowances Benefit Military Families
By Greg Rosica
Spring 2006
If you or someone in your family is a member of the military, filing your taxes may not be at the top of your mind right now. Fortunately, the Internal Revenue Service (IRS) recognizes the unique issues you face as a member of the military and has created many tax deductions and allowances to benefit you and your family.
Tax Estensions
Citizens or residents posted outside the United States and Puerto Rico are allowed an automatic two-month extension (until June 15, 2006) to file their 2005 returns and pay any federal income tax. However, if payment is submitted after the regular due date (April 17, 2006), interest will be charged until the tax is paid.
For individuals serving in a combat zone, the deadline for filing, paying taxes or filing a claim for refund is automatically extended for 180 days. For purposes of the automatic extensions, the IRS definition of "combat zone" includes the following areas:
- Persian Gulf area
- Qualified hazardous duty area of Bosnia and Herzegovina, Croatia, and Macedonia
- Qualified hazardous duty area of the Federal Republic of Yugoslavia, Albania, the Adriatic Sea, and the Ion Sea north of the 39th parallel
- Afghanistan
Dependency Allotments
Dependency allotments for individual family situations can be complex for military men and women serving abroad, as they try to make sure their dependents receive support.
When determining whether an individual in the military can claim a dependency exemption on a tax return, the part of allotment contributed by the government and the part taken out of the individual's military pay are both considered provided by the individual in figuring whether he or she provides more than half of the support.
There are also exceptions for providing allotments to support persons outside of those named. For example, if an allotment goes to a widowed mother who is in turn supporting a brother or sister of the individual and that allotment is more than half the support, an exemption can be taken for each of them.
Military quarters allowances are treated the same way as dependency allotments in figuring support. The allotment pay and the tax-exempt basic allowance for military quarters are both considered as provided by the military individual for support.
Moving Expenses
Moving is a way of life in the military. Individuals on active duty who move because of a permanent change of station can deduct unreimbursed moving expenses and need not meet the distance test.
Sale of residence. Members of the Armed Forces can choose to have the five-year test period for ownership and use suspended during any period they or their spouses serve on "qualified official extended duty." This means that they may be able to meet the two-year use test even if, because of their service, they did not actually live in their homes for at least the required two years during the five-year period ending on the date of the sale.
Uniforms. A taxpayer generally cannot deduct the cost of uniforms if he or she is on full-time active duty. However, in the case of a member of the Reserves, the unreimbursed cost of uniforms may be deducted if military regulations restrict wear except while on duty as a Reservist. In figuring the deduction, the cost is reduced by any non-taxable allowance received for expenses.
Travel expenses. A member of a Reserve component of the Armed Forces who travels more than 100 miles away from home in connection with the performance of services can deduct travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. The amount of deductible expenses is limited to the regular federal per diem rate and the standard mileage rate, plus any parking fees, ferry fees and tolls.
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Greg Rosica is a Tampa, Fla.-based partner in the tax practice of Ernst & Young LLP. These military tips and many others are included in the 21st edition of "The Ernst & Young Tax Guide 2006," available online and in stores. For more information, visit www.ey.com/us/tax.
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