More tax tips as April 15 deadline approaches
Hello Military Community,
I have received queries for more information and details about filing taxes since writing about it in January. This week’s column is a follow-up to those queries.
With the start of the New Year upon us and tax deductibles being taken away from service members and their families it can be confusing. With the exception of those serving in combat zones or stationed outside the U.S, most military personnel and their families must file taxes by the traditional April 15 deadline.
Let’s face it – everyone gets confused doing taxes; I know I do. The American tax system isn’t known for its simplicity. And the confusion factor just climbs higher when you lived or worked in more than one state or country during the year.
Generally speaking, service members are subject to taxes in their “home of record,” which is the state where they resided at the time of their enlistment or commissioning. Under federal law, states are prohibited from taxing the military income of nonresident service members who are stationed in their states. Remember, this protection ONLY applies to military income. If you also have a nonmilitary job, you’ll be subject to paying resident state income taxes on those wages.
If you live in one state and work in another, you will probably have to file a tax return in both states. Your state of residency usually taxes all your earned income – no matter where you earned it. Meanwhile, states where you worked but didn’t live usually require a non-resident income tax return.
Fortunately, your resident state will often give you a credit for the taxes you pay to other states. You can deduct state income taxes on your federal return ONLY if you itemize your deductions. You may also deduct real estate taxes, personal property taxes and state and local sales tax on your federal tax return.
As usual, there are a number of unique credits and deductions available to service members. All information listed here along with a complete listing of deductions, taxes on disability, retirement pensions and more is supplied by the IRS in the Armed Forces Tax Guide. For further clarification or for additional deductions, and information on available tax credits, go to www.irs.gov//pub/irs-pdf/p3.pdf or call 800-829-3676.
Before 2009, military spouses were subject to taxes in the state where their spouses were stationed. Thanks to the Military Spouse Residency Relief Act, however, they can now choose to be treated as if they still lived in their previous state. That could make them eligible for a state income tax refund. If they had taxes withheld they could file to claim it.
Most large military installations worldwide offer tax help to service members and their families through the Volunteer Income Tax Assistance Program which is sponsored by the IRS. VITA volunteers are trained and certified by the Internal Revenue Service, and those working at on-base sites understand military-specific tax issues, such as combat zone tax benefits, military spouse working questions and more – plus it’s free.
A couple of military friendly tax preparation companies that may be of interest are:
- TaxSlayer offers a free military edition for active duty-service members to prepare federal and state returns online: www.taxslayer-com-military-offer
- TurboTax offers discounts on software customized for active-duty military and reservists. Service members with pay grades of E1-E5 can get the software for free, while pay grades of E6 through all officer pay grades can get the software at a discounted price: www.turbotax-military-edition
- TaxBrain offers a 20 percent military discount when filing your tax return. Be aware that the package price varies depending on answers to their questionnaire: www.taxbrain-military-tax-filling-discount.
- A site I came across this week and is very informative is being offered by Military.com. It list information on state income tax rules, organized alphabetically by state. Information on U.S. territories and possessions is included at the bottom of the list. You can view it at: www.military.com/money/personal-finance/taxes/state-tax-information.html?ESRC=finance.nl
I hope this answers questions that some of you raised, and points you to the right direction. Remember, if you are deployed overseas and you need more time to complete your taxes, you can file for an extension.
Blessings from my family to yours,
If you have any questions or concerns or would like to share a story or situation, contact me at Kim@MilitaryResourceBooks.com and visit my website at MilitaryResourceBooks.com for updated information and other resources not listed in my book.