State Taxes For Military
Unlike federal taxes, which all currently serving personnel pay on their income, state taxes vary widely for service members.
And remember: you pay state taxes in the state of your legal residence, not in the state youre currently stationed.
Heres how the state tax rates break down for different segments of the military community.
Were You Deployed During Tax Season And Didnt File Taxes If You Were In The Military And Missed Filing Prior Year Taxes Its Not Too Late
If you were deployed and missed filing taxes, dont worry. In fact, tax deadlines are extended for many of those in the military. Not to mention, the deadline extensions for taxes already due apply to spouses of military members as well. This means, you may think youre filing late taxes when in reality, youre not.
Its important to note that U.S military personnel are not exempt from filing and paying taxes. If you were in the military , your late tax returns can be filed on PriorTax for both federal and state taxes.
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What Filing Status Should A Military Spouse Choose
Because you are married, you have the option to file together or separately. If you are filing one return for both of you, youll find the tax information you need like your spouses W2 on MyPay.
When you file jointly, the return typically must be signed by both spouses. However, if yours cant sign due to a deployment, for example, you can use a power of attorney to file while they are away.
There are some situations where filing separately is beneficial, but it could also make you ineligible for certain tax breaks, like the Earned Income Tax Credit .
The standard deduction nearly doubled under the new tax laws for 2018-2025. If you file jointly, your deduction is $24,800. If you file separately, the deduction is $12,400.
Live And Work Outside Your Home Of Record
Members of the military typically choose their Home of Record as their state of residence. Others change their state of residence over the course of their careers. Often members of the military change that state of legal residence during their career if they plan on returning to a state in retirement. Many members of the military have found the allure of Colorado, Florida, or Texas too much to pass up and plan to come back to the state in retirement, for example.
Your home of record or state of legal residence is where you would pay your state taxes if your state requires you to pay state tax. Several states do not have a state income tax, and others exempt portions of military income from state taxes.
Federal law prohibits another state from taxing the wages of nonresident military members stationed in that state. So, if you are a resident of South Carolina but stationed in North Carolina, you wont have to pay North Carolina state taxes. South Carolina would tax your military income instead.
Things are a little different and more complicated if you take a second job or moonlight after youre done with your day job. If a member of the military takes a second job thats not with the military, like working a shift a local retail store, for example, you would most likely have to file a state income tax return as a nonresident for those non-military wages.
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Filing Tax Return On Your Own
All Americans have the legal right to to complete their taxes on their own for free. It can be a complicated process, which is why so many of us pay for services or accountants to make sure its done right. However, anyone making under $69,000 a year can download the IRSs Free File Online software for no cost to help you file.
Combat Zone Service Tax Extensions
- There is a 180 day extension from the last day in combat zone or an area of hazardous duty.
- There is an extra extension in addition to the 180 days for the number of days in combat zone before the tax deadline. For example, if you entered combat zone on April 8th, it would be seven days before the tax deadline therefore you would add seven days to the 180 day tax extension.
- If you or your spouse were hospitalized outside of the US due to injury from the combat zone or hazardous zone, the deadline will be 180 days from the discharge date.
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Being Stationed Overseas But Not In A Combat Zone
If youre stationed overseas, you treat your income tax and tax filings exactly like you would if you were in the United States. You must continue to file your federal income tax and state taxes for your state of legal residence by the filing date.
There are no automatic extensions or exclusions simply for being stationed overseas when youre not in the combat zone.
Getting Help Filing Taxes Getting An Extension
In addition to serving in a combat zone, there are other ways service members can obtain an extension on filing taxes beyond the tax deadline. To find out more about your obligation to file taxes, obtain an extension, and discover service member-specific tax benefits, call 800-342-9647 to schedule a free appointment to talk with a Military OneSource MilTax consultant.
Other tax assistance for service members and their families can be obtained through:
- The Volunteer Income Tax Assistance program. Offered for free by the IRS, this program is for those living on or off the installation and includes sites for military members overseas. VITA staff can help you with military tax issues.
Due to the coronavirus, there this a reduced number of in-person VITA locations, especially overseas. You can call Military OneSource any time, 24/7 to schedule a consultation with a MilTax consultant.
- Military OneSource MilTax free tax filing services. MilTax tax preparation and e-filing software, available mid-January through mid-October, allows you to prepare and file your federal and state taxes with ease. Its designed to address military-specific scenarios, such as those described above. If you have questions along the way, call 24/7 to schedule an appointment with a MilTax consultant, .
- The IRS has a web page on tax information for military members who serve in the U.S. Armed Forces and uniform services.
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Military Spouses And State Taxes
Military spouses may elect to use their active-duty service members state of legal residence for the purposes of taxation, as long as their current location is a result of their service members military orders.
Military families in atypical situations are not always covered by these protections, and the military spouse may need to file in the state where they are physically residing.
Military Tax Returns For Spouses During Deployment
If youre the spouse of a service member, you also might wonder about how to file taxes while your spouse is deployed. Good news military spouses are now taxed much the same as military members. This is due to the Military Spouses Residency Relief Act of 2009 . Under this act, military spouses can maintain their original states of residence or choose your service member spouses state of residence. This is true even if you move to a state where your spouse is stationed, as long as you meet these military residency requirements:
- You go with your military member spouse to a state outside your home state. Your spouse must be moving on military orders.
- Youre in the duty-station state only to be with the military member.
This makes filing taxes while deployed a bit simpler. If you meet these military residency requirements, your earned income while in the duty-station state wont be taxed by that state. This applies even if the income might be subject to tax in your home state. Likewise, your property isnt subject to tax in the duty-station state.
So, both the non-military income earned by you and the military income earned by your spouse are exempt from state tax in the duty-station state. This makes military tax filing much simpler overall. Both of you still have to pay income and property taxes in your home state.
To learn more, visit your states tax office website.
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Who Can Use Miltax
MilTax is a joint service offered by Military OneSource and the Department of Defense. It’s offered to all active-duty service members as well as recently separated veterans.
Unlike the other services offered, MilTax will provide free federal and state returns no matter how much money you make or where you live. With customized options developed for the military, MilTax supports all the complicated tax situations you’ll find yourself in as a service member. This includes free state filings for up to three different states as well as OCONUS living, and even dealing with rentals.
MilTax is operated by H& R Block, and you’ll need to create a Military OneSource account in order to access the software. Once registered, you’ll be led through tax preparation software before e-filing your return.
Deductions For Military Personnel
Tax deductions for service members are similar to those applicable to civilians. However, certain considerations are given to military to account for active-duty periods.
Unreimbursed business expenses may be included as a deduction on the tax returns. These expenses may cover some uniform costs, professional dues and certain educational expenses for courses related to the position.
For tax purposes, the home of military personnel is the permanent duty station. Work-related expenses to and from this home may be listed as deductions. These items may include meals, lodging, taxi service, tips and laundry service. Some transportation expenses may also be deductible if they were related to a temporary work or base location.
In the case of a sale of a principal home, as with non-military members, the gains on that sale are non-taxable. Unlike civilians, however, the five-year test period may be suspended for military personnel serving on qualified official extended duty with the service.
While a less important consideration it is nonetheless important to point out that U.S. military personnel who are stationed outside of the U.S. or in combat zones may not be subject to the same filing deadlines as the general population. These military tax filing deadlines can change from year-to-year.
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If Two Months Isnt Enough Time
If two months is not enough time, its best to know this information regarding the 4868 form:
- Military personnel can file a tax extension with the 4868 form which will allow the tax deadline to be postponed six months.
- Form 4868 must be filed before the April tax deadline via mail, internet or phone.
- The deadline for filing late taxes will be in October .
What Can Military Deduct On Taxes
Eligible expenses include business-related meals, lodging, laundry, and business phone calls. If you are a member of a reserve component of the Armed Forces that must travel more than 100 miles away from home in connection with your service, then you can deduct your travel expenses as an adjustment to income.
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Us Territories & Possessions
Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Virgin Islands and Puerto Rico have their own independent tax departments. If you have income from one of these possessions, you may have to file a U.S. tax return only, a possession tax return only, or both returns. This generally depends on whether you are considered a resident of one of the possessions. In some cases, you may have to file a U.S. return, but be able to exclude income earned in a possession from U.S. tax. For more information, see the IRS International Taxpayer page.
Do Military Members Have To Pay Taxes
Yes. A service members pay is broken down by type. Some of it is tax free, but some of it is taxable. Your spouses base pay is taxable unless they are serving in a declared tax-free combat zone. There is also tax for Special Pay , Bonus Pay , and Incentive Pay . Things that are not taxed include your BAH , BAS , OHA , and certain disability payments.
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What Is My Military State Of Residence
There are two terms used by the military to define your state of residence:
Home of Record. Your home of record is the state recorded by the military as your home when you were enlisted, appointed, commissioned, inducted, or ordered in a tour of active duty. This is often the state you should continue to use as your tax home as you move from state to state on military orders.
State of Legal Residency. Your state of legal residency is your “Home of Record,” unless you changed it to another state. Changing the state on your paycheck records doesn’t change your SLR.
To change the SLR, a DD Form 2058 must be submitted to your local finance officer and accepted.
From a tax standpoint, your State of Legal Residency is considered your “domicile” or “resident” state as long as you are on active duty. Even if you are stationed in another state, youre still considered a resident of your SLR.
To find out if you need to file a state tax return when you aren’t stationed in your resident state, check out Military Information on State Websites, which has links for active duty military and their spouses in each state. If you have non-military earnings, review Civilian Pay Earned by Active Duty Military.
IMPORTANT: The Military Spouse Residency Relief Act describes where spouses of military service members can file state income taxes. For more info, see Military Spouses and State Taxes.
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Other Tax Perks For Military Personnel
Military personnel may also have access to other tax benefits. There are several types of military compensation and other benefits that are not subject to federal income taxes, and some can be included in income for tax credit and IRA contribution purposes. Some examples include:
- Combat zone pay
- Some moving expenses
- Living allowances
Also, tax debt may be forgiven or refunded if a member of the military dies in a combat zone, or from terrorist activities or other military action. If you are in the military, consider reviewing the IRS tax booklet, “Armed Forces’ Tax Guide,” before filing your taxes.
Tax Extensions For Military
Members of the military serving in a combat zone can receive an automatic extension if needed to file their income taxes. Members of the military and government civilians working with the armed forces who are serving in a combat zone receive a tax extension from the IRS. The extension extends filing deadlines, payments, suspends audits, and suspends enforced collections for 180 days until after the service member or civilian has left the zone.
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