Members of the military and their families often qualify for special tax benefits. For example, members of the armed forces don’t have to pay taxes on some types of income. In addition, special rules could lower the tax they owe or allow them more time to file and pay their federal taxes.
Here are some of these special tax benefits:
- Combat pay exclusion. If someone serves in a combat zone, part or all of their combat pay is tax-free. This also applies to people working in an area outside a combat zone when the Department of Defense certifies that area is in direct support of military operations in a combat zone. There are limits to this exclusion for commissioned officers.
- Deadline extensions. Some members of the military – such as those who serve overseas – can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes.
- Earned income tax credit. Military members who get nontaxable combat pay may choose to include it in their taxable income. One reason they might do this is to increase the amount of their earned income tax credit. People who qualify for this credit could owe less tax or even get a larger refund.