American Expat Taxes and the Armed Forces – What are the Benefits?

US Expat Taxes Are Still Required For Active Duty Armed Forces Personnel

Many servicing overseas in the US Armed Forces may not know that they will still need to file US expat taxes. Fortunately, if you, your family, or someone you know is servicing active duty abroad, there are a number of significant tax benefits and options available.

Moving Expenses

You may be able to deduct some of your unreimbursed moving expenses due to a permanent change of station. Make sure to keep receipts for your out-of-pocket expenses, including payment for boxes and supplies, cleaning services, movers and anything else involved in with your move.

Combat Pay

Depending on the location and type of service, you are eligible for certain deductions and even exemptions on your US expat taxes. If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service during that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay. You can also elect to include your nontaxable combat pay in your “earned income” for purposes of claiming the Earned Income Tax Credit.

Extension of Deadlines for US Expat Taxes

The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.

Uniform Cost and Upkeep

If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

Joint Returns

Joint income tax returns are usually signed by both spouses. However, when one spouse is unavailable due to military duty, a power of attorney may be used to file a joint return.

Travel to Reserve Duty

If you are a member of the US Armed Forces Reserves, you can deduct un-reimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

ROTC Students

Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay, such as pay received during summer advanced camp, is taxable.

Back to Civilian Life

You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

IRS Publication 3

Armed Forces’ Tax Guide, is an excellent resource as it summarizes many important military-related tax topics: Publication 3.

Still Have Questions About Your American Expat Taxes?

American expat taxes can be quite complicated. If you get behind, don’t worry: We have a post on filing US expat taxes late. If you have any other questions or would like to learn about our expat tax services, please contact us.

Free Guide: The 25 Things Every Expat Needs to Know About Taxes

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