Every Veterans and Memorial Day we remember and cherish the sacrifices members of the armed services make for the good of our country. American veterans and service members hold a special place in our society that honors their service. And we appreciate them through more than just holidays, but by a special appreciation.
For Family and Friends in the Military, Tax Code Rewards Service
So when it comes to that part of the government that we all deal with– the IRS – service members are given a variety of gifts in the tax code as a way to give thanks. For example, when the U.S. government passed an economic stimulus measure to kick start the economy, thousands of military families qualified for stimulus payments of up to $1,200 plus more if they had children.
Tax Benefits for Service Members
Whether you’ve served in a combat duty or not, if you, a friend or family member are in the military then Uncle Sam’s on your side with these tax tips:
- Extended Homebuyer Tax Credit: Members of the military, intelligence community and Foreign Service can purchase a home by April 30 (but must close escrow by June 30), 2011 to receive a tax credit worth $8,000. Generally, taxpayers had to close escrow on a home by October 1, 2010 to qualify, but certain members of the military, intelligence operatives and Foreign Service workers were granted additional time.
- Combat pay: Members of the military who serve in combat zones receive two benefits. The first of which is combat pay, where a service member receives an additional $225 per month. The IRS will not consider that amount as income or taxable. Also, you can exclude the income earned while serving in a combat zone from federal income taxes. Even if you served only one day of a given month in a combat zone, it applies. The IRS will not tax the rest of your military pay for that month.
- Separation allowance: The hard work service members perform is hard enough, but making it harder is being away from family. That’s why when military members with dependents are deployed for more than 30 days away from their loved ones, they receive a Family Separation Allowance of $250 per month.
- Military differential pay: Members of the National Guard or Reserve who are called to active duty can continue to receive full pay from their job if their employer voluntarily agrees to keep paying them. Known as military differential pay, the tour of duty must be longer than 30 days. While the payments are wages for income tax purposes, they are excluded from Social Security and Medicare taxes.
- Overnight deductions: National Guard and Reserve members may be able to deduct travel expenses. They can deduct should their service require them to stay overnight somewhere more than 100 miles from home. Let’s say you pay for stuff like transportation costs, meals and lodging for a meeting or a drill. You can deduct them but only at the same rates that federal employees can.
- Guaranteed interest savings accounts: Military members who serve in a combat zone are able to deposit up to $10,000 a year of their pay into a savings account that guarantees 10 percent interest every year. After a temporary phase out following the Vietnam War, it returned in the 1990s and still exists.
Helping Our Service Members
Washington politicians tweak the enormous tax code every year. With so much sacrificed by our service members, it’s only right that they get a little something back every April. The IRS can do some good with the laws on the books, but they can also go after you. If you have back tax debt, they can pursue a wage garnishment or bank levy.
But you have options. With the right representation, you can resolve your back tax debt, sometimes for less than what you owe. If you’re looking for an aggressive tax attorney armed with some intellectual firepower, give us a call.