Are you, or your spouse, in the military?  Whether it’s moving to a new base or traveling to a duty station, members of the Armed Forces have many experiences that could impact their tax situation. Here are some tax tips to keep in mind to help with filing the 2010 tax return, or even amending last year’s return.

Moving Expenses: You can deduct reasonable expenses incurred if you move.  You need to be on active duty, and you are moving because of a permanent change of station.  This applies to you and members of your household. IRS Form 3903 is required. Additional information is found in IRS Publication 521, page 15, under Members of the Armed Forces.

Combat Pay: If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay for that month is not taxable and should not be included in wages. Officers’ exclusion from taxation is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay.

Deadlines: The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military. You can find more on this subject here.

Uniform Cost and Upkeep:  If military regulations prohibit you from wearing certain uniforms when off duty, cost and upkeep of those uniforms is a deductible item. However, if you receive a uniform allowance or reimbursement, you must reduce the amount you can deduct.

Joint Returns:  Joint returns must be signed by both spouses. However, when one spouse is not available due to military duty, a power of attorney IRS Form 2848 may be used to file a joint return. If you do not have this form, and if your spouse is unable to sign a return because he or she is serving in a combat zone or is performing qualifying service outside of a combat zone, you can sign for your spouse. Attach a signed statement to the return that explains that your spouse is serving in a combat zone.

Away From Home Travel Expenses:  You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home.  Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home. Examples of deductible travel expenses include:

• Expenses for business-related meals, lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary or temporary additional duty.
• Expenses of carrying out official business while on “No Cost” orders.

To be deductible, your travel expenses must be work related.  You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty.

(You can find more information about deductions, etc. in IRS Publication 463.)

Reserve Duty Travel:  If you are a member of a reserve component of the Armed Forces and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to income prior to arriving at your adjusted gross income, rather than as a miscellaneous itemized deduction (Schedule A).  

ROTC Students:   Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.  See Tax Information for Students.

Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

Much more detail is provided in IRS Publication 3. Visit your local PRO-TAX office for additional help in understanding all these opportunities for deductions and credits.  Let PRO-TAX deal with the IRS…so you don’t have to!