Veterans Day is a day of celebration and remembrance for all of the Veterans who served our country and those military members still serving our country. In honor of our military members and their families, we would like to share seven tax savings available for military families.
1. Combat pay: If you are serving in a combat zone, your pay is not taxable to you (for military officers, the tax-free pay is subject to a cap). Also, if your spouse, who worked as a contractor or employee supporting the U.S. armed forces in designated combat zones, may qualify for the foreign earned income exclusion.
2. Military uniforms: One big expense for military members is uniforms. Military uniforms and utility uniforms that cannot be worn off duty, as well as reservists’ uniforms that can only be worn while performing reservists’ duties, are tax deductible if you were not reimbursed for your expenses. Also, don’t forget epaulets, corps devices, and swords that you purchased for military activities.
3. Dependent care: These assistance programs for military personnel are excludable benefits and not included in military member’s income.
4. Earned Income Tax Credit (EITC): For tax year 2023, EITC is worth up to $7,430. Low-and moderate-income service members who receive nontaxable combat pay can use a special computation method that could boost the EITC. This means you could owe less in taxes or get a larger refund.
5. Moving expenses: If you are on active duty and have a permanent change of station, unreimbursed moving expenses in connection with that change are tax deductible. Also, allowances paid to move members for a permanent change of station are not taxable.
6. Deadline extension: If you serve in a combat zone during tax filing season or are hospitalized because of injuries sustained in a combat zone, you are extended at least 180 days after leaving the designated combat zone.
7. Thrift savings plan: Enrolling in the Uniformed Services Traditional Thrift Savings Plan (TSP) is a good way to save both money and taxes! Your contributions to your Thrift Savings Plan are made tax-free, and the growth in your TSP account is tax-deferred, meaning you won’t pay taxes on the TSP until you take your money out, ideally in retirement.
Luckily, you don’t have to know any of these tax laws come tax time. TurboTax will ask simple questions about you and give you the tax deductions and credits you are eligible for based on your answers.