As a military service person, you will receive a Form W-2, Wage and Tax statement, like other employees. This form will document your military pay that is subject to taxable income. In cases where you were paid for military service in a combat zone, those wages may be excluded from taxation. Additionally, any commissioned officers’ excludable compensation should be previously calculated and not included on the W-2 in Box 1. These exclusions are not subject to income tax, however they still are taxed by Medicare and Social Security. Therefore it is included in Box 3, Social Security wages, and Box 5, Medicare wages. State taxation varies with each location.

You should double check your W-2 to ensure all excluded pay is accounted for, and is not listed in Box 1. See your finance office if your W-2 form is not correct, or if the amounts listed include nontaxable amounts. You need to obtain a corrected W-2 form to exclude the amount mistakenly reported in Box 1 when you file a tax return.

There are certain expenses, which if gone unreimbursed to you, are eligible for deduction at tax time. These deductions can reduce the amount you owe in taxes. As a military service member, you may be eligible to deduct:

• Job related training
• The maintenance and cost of military dress uniforms and reservists’ uniforms if they are unable to be worn off-duty
• Dues assessed to professional memberships and publications, though officers’ club and noncommissioned officers’ club fees are excluded from deduction
• Moving expenses if you are active duty and you have order to permanently change stations
• Travel expenses, including meals (with limits) mileage, and laundry costs, when traveling away from your permanent duty station for authorized drills and training regiments

It’s important to note the various options you have at tax-time, including which sources of income are non-taxable.

• You have the option to use nontaxable combat pay to calculate the Additional Child Tax Credit and the credit for Child and Dependent Care Expenses.
• You can use non-taxable combat pay to calculate contribution eligibility for an IRA.
• Military base realignment and closure benefits are usually excluded from taxable income.
• Dependent care assistance benefits are non-taxable
• Death gratuity received for an Armed Forces member who became deceased after September 10, 2001 is excluded from income, and you may be entitled to a refund of tax paid on gratuities.
• You may be exempt from the five-year period in determining whether you can exclude the gain from the sale of your primary home after May 6, 1997, while you are serving on qualified official extended duty. If you paid tax on the gain, you may be able to claim a refund.
• Distributions from a qualified tuition program (QTP) or a Coverdell education savings account (Coverdell ESA), may not be subject to 10% additional tax on the part of the distribution that normally would be included in gross income. In order to be exempt, the designated beneficiary must have attended one of the three military academies (U.S. Military Academy at West Point, U.S. Naval Academy at Annapolis, or U.S. Air Force Academy at Colorado Springs), the Coast Guard academy, or the Merchant Marine academy and the distribution must not exceed the costs of advanced education attributable to that attendance.
• You can include combat pay into the calculation of earned income for the earned income tax credit (EITC). This can either increase the amount of your earned income credit, or if you exclude combat pay, may help you qualify for the credit.
• National Guard and Reserve members have above the line travel deduction options when reporting for duty that is more than 100 miles from their home.
• Income tax liability is suspended for any military member who dies while in combat. Tax liability is forgiven for any other year ending on the first day the member served as active duty. If tax has already been paid, it will be refunded. Unpaid taxes for years prior are also forgiven.