Tax Breaks for the Military Family

Tax Breaks for the Military Family

There are certain tax breaks available to members of the U.S. military and their dependents:

Sale of the principal residence

A taxpayer on qualified official extended duty in the US Armed Services or the Foreign Service may suspend for up to 10 years of such duty time the running of the 5-year ownership-and-use period before the sale of a residence.

This election applies to one property at a time. To qualify, a taxpayer must meet the following criteria for more than 90 days:

  • The duty station is at least 50 miles from the residence
  • The taxpayer is residing under orders in government housing

Deduction for overnight travel expenses of National Guard and Reserve members 

Reservists who stay overnight more than 100 miles away from home while in service (e.g., for a drill or meeting) may deduct unreimbursed travel expenses (transportation, meals, and lodging) as an above-the-line deduction. The deduction is limited to the rates for such expenses authorized for federal employees, including per diem in lieu of subsistence.

Dept. of Defense Homeowners Assistance Program

The military’s Homeowners Assistance Program has been in place for decades to help homeowners who have trouble selling their homes due to a Base Realignment and Closure (BRAC) initiative.

Payments made after Nov. 11, 2003, under this program to offset the adverse effects on housing values of military base realignments or closures will be excludable from income as a fringe benefit.  Additionally, military members’ payments are not subject to social security or Medicare taxes.

Combat zone extensions expanded to contingency operations 

The various extensions granted to combat zone participants to file returns or pay taxes will also apply to those military members serving in Contingency Operations outside the United States, as designated by the Secretary of Defense.

Dependent care assistance programs

Dependent care assistance programs for military personnel are excludable benefits and not included in the military member’s income.

Death benefits

Survivors of deceased Armed Forces members receive a $100,000 death gratuity. This gratuity is not taxable.

Military academy attendees

The ten percent tax on payments from a Qualified Tuition Program or Coverdell Education Savings Account that are not used for educational expenses does not apply to attendees of the U.S. Military, Naval, Air Force, Coast Guard, or Merchant Marine Academies to the extent the payments do not exceed the costs of advanced education.

Jeffrey Schneider, EA, CTRS, NTPI Fellow, has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax & Accounting, an Enrolled Agent, a Certified Tax Resolution Specialist, and Advanced Crypto Tax Expert.
Author of the Now What? Help! series. Jeff defines and deconstructs IRS notices and clarifies the letters and actions the IRS will take to get what they want. He interprets the world of the IRS in a fashion that mixes attention to detail with humor to help you better understand and resolve your tax problems.

The books are available in paperback and eBook on Amazon.

For more on SFS Tax & Accounting, visit:
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