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Top Tax Tips for Military Personnel

For service members, there are exclusive credits and deductions available. In this article, it will focus on the deductions available to military families. All information is centered on information provided by IRS in the Armed Forces Tax Guide.

This document refers the further clarification and additional deductions. It also includes information on available tax credits.

Gross Income

Military service members may receive many different types of pay.

For tax purposes, to identify the types of pay and also different allowances that can be excluded from your gross income. The exclusions include the living allowances, moving other places allowances, travel allowances to move from one side to another, combat zone pay, and also death allowances.

Excluded items are not generally subject to tax, but it may have to be shown in your tax return process. We will examine exclusions from income. Also, examine relevant deductions from income in more detail.

Combat Zone Exclusion

You can exclude certain pay from your income if you are a member of armed forces and also serve in designated combat zone.

The month when you receive the pay must be a month in which you either served in the combat zone or you were hospitalized as a result of injury, wounds, or disease obtained while serving in the combat zone.

You also need to spend more days in a month to qualify for an exclusion. There is some example of pay types eligible for exclusion.

  • There is active duty pay earned in any month, in which you served in a combat zone
  • It also Imminent danger/hostile fire pay
  • A reenlistment bonus is given if this extension occurs in that month you served in a combat zone
  • It also includes pay for accrued leave earned in any month you served in a combat zone
  • There is also portion of any student loan repayment that is made for the year while serving in a combat zone

Retirement Contributions

You can also deduct some portion of the contributions that you make to your traditional individual retirement account (IRA) for the year. On the other hand, if you and your spouse were covered by an employer-maintained plan during that year then not of all of these deductions may be eligible. According to the IRS concept, Armed Forces members are considered that is covered by an employer-maintained retirement plan.

Must remember, military personnel member qualify for additional time to make contributions to an IRA. Keep in mind when combat service pay is nontaxable. You must calculate your pay as part of your limits on IRA contributions and also deductions of IRA contributions.

Sale of a Home

You do not need to pay tax on all of the profit realized from the sale of your main home. A deduction includes up to $250,000 of gain (or $500,000 if you are married) is generally also available for the sale of the main home in 2009. A good home is defined that having been lived in as a primary residence for more than two years.

You also are able to exclude gain more from the sale of a home. That was also used as a rental or business property as long as it also meets certain ownership test. You cannot deduct a great loss from the sale of your main home.

Moving Expense

If you are an old member of the Armed Forces on active duty and you want to move because of a permanent change of station, then you are entitled to a deduction for a move and reasonable un-reimbursed moving expenses that are related to travel and the cost of moving household goods and personal effects.

Educational expenses

You can also deduct the cost of work-related education expenses as long as it meets greatly one of two qualifying criteria as defined by the IRS rules:

It is greatly required by your employer or the law and regulation to maintain your salary, status or job.

It maintains or improves your skills needed in your present work.

This education needs cannot be used simply to meet minimum job requirements or cannot be used to find a new trade work or business. With different exceptions, travel and other expenses for obtaining this education can also be deducted.

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