Members of the Armed Forces receive many different types of pay and allowances which has a big effect on how their Adjusted Gross Income. Some items of what members of the armed forces earn are includible in gross income while others are excludable from gross income. It is important to understand what is considered excludible military pay when you are a member of the military and are computing your taxes.
Includible and Excludible Income Armed Forces
The most important thing to remember , is that includible items are subject to tax and must be reported on your tax return.Excludable items are not subject to tax, but may have to be shown on your tax return. Software such as TurboTax and H and R Block can help you figure out which items are part of your income and which parts are not. Many tax preparation software and companies have extensive experience in preparing tax returns for members of the armed services.
Includible Items in Armed Forces Income
These items are includible in gross income, unless the pay is for service in a combat zone.
- Active duty
- Attendance at a designated service school
- Back wages
- Reserve training
- Training duty
Special Pay for Armed Forces Members
- Aviation career incentives
- Diving duty
- Foreign duty (outside the 48 contiguous states and the District of Columbia)
- Hostile fire
- Imminent danger
- Medical and dental officers
- Nuclear-qualified officers
- Special duty assignment pay
Other Payments to Armed Forces Members
- Personal money allowances paid to high-ranking officers
- Student loan repayment from programs such as the Department of Defense Educational Loan Repayment Program when year’s service (requirement) is not attributable to a combat zone.
Excludable Items from Armed Forces Income by IRS
These items are excludable from gross income. The exclusion applies whether the item is furnished in kind or is a reimbursement or allowance. There is no exclusion for the personal use of a government-provided vehicle.
Special Pay Excluded for Armed Forces Members
- Compensation for active service while in a combat zone or a qualified hazardous duty area. Note: Limited amount for officers.
Living Allowances Excluded for Armed Forces Members
- BAH (Basic Allowance for Housing) allowances You can deduct mortgage interest and real estate taxes on your home even if you pay these expenses with your BAH.
- BAS (Basic Allowance for Subsistence)
- Housing and cost-of-living allowances abroad whether paid by the U.S. Government or by a foreign government.
- OHA (Overseas Housing Allowance)
Family Allowances Excluded for Armed Forces Members
- Certain educational expenses fordependents
- Evacuation to a place of safety
Moving Allowances Excluded for Armed Forces Members
- Move-in housing
- Moving household and personal items
- Moving trailers or mobile homes
- Temporary lodging and temporary lodging expenses
Travel Allowances Excluded for Armed Forces Members
- Annual round trip for dependent students allowances
- Leave between consecutive overseas tours
- Reassignment in a dependent-restricted status
- Transportation for you or your dependents during ship overhaul or inactivation
- Per diem
Other Payments Excluded for Armed Forces Members
- Defense counseling payments
- Group-term life insurance
- Professional education
- ROTC educational and subsistence allowances
- Survivor and retirement protection plan premiums
- Uniform allowances
- Uniforms furnished to enlisted personnel In-kind military
- Legal assistance
It is best to consult the official IRS Publication 3 on Excludible Military Pay.