Quite often I get asked what type of tax breaks are our men and women in the military receiving. This is a complicated question because military personnel receive different types of pay. It is a question that will be answered over a series of articles.
Service members are eligible for various types of exclusions and deductions from their income. For instance, there is the living allowance, travel allowance, combat zone pay, and death allowances. In this article, I will first address combat zone pay.
A member of the military can receive a combat zone exclusion by either having served in a combat zone or were hospitalized as a result of injuries or illness inflicted/contracted while serving in a combat zone. In order to obtain the exclusion from income, a member must have only served in the combat zone for one or more days within a month.
The types of income that are allowed for exclusions are: (1) pay for accrued leave earn while serving in the combat zone, (2) any student loan repayment during the time while serving (3) reenlistment bonus if this occurs while serving in the combat zone, (4) active duty pay during the time served, and (5) imminent danger/hostile fire pay.
Both extensions for filing and paying federal income taxes are extended while serving in a combat zone or hospitalized as a result of injuries/illness obtained while in a combat zone. The extension is 180 days beyond the last day of service within the combat zone. No interest or penalties are charged during this time frame.
It is always best to sit with a tax professional to answer any questions one may have about deductions and exclusions to income for tax return purposes. Tax professional fees can be deducted during the year they are incurred.
AllRight Consulting & Tax, LLC