For regular citizens, the fiscal cliff deal brings lots of changes to how our taxes will be calculated.
For servicemembers, the first step to filing taxes is to figure the gross income. Members of the Armed Forces receive many different types of pay and allowances. Some are includible in gross income while others are excludable. 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.
Fortunately, servicemembers can exclude many items from gross income. The following is a list of includible and excludable items for gross income for military personnel:
The following items are includible in gross income, unless the pay is for service in a combat zone (where special rules apply). You must include these items when computing your annual gross income.
The following items are excludable from gross income. The exclusion applies whether the item is furnished in kind or is a reimbursement or allowance.
You can deduct mortgage interest and real estate taxes on your home even if you pay these expenses with your BAH.
Health Expenses and In-kind Benefits
Education Allowances and Benefits
Other Excludable Payments
Excludable In-Kind Military Benefits
Excludable Special Pay
For more information on compensation for service while in a combat zone and qualified hazardous area, see Combat Zone Exclusion.
With tax season in full swing, you should take note of the many deductions and credits available to you because of your military service; whether on active duty or on reserve.
Although going back to school can be a pricey venture, military servicemen and women should keep in mind that their military status makes them eligible for certain education benefits.