It’s that time of year again! The due date for filing your taxes is April 15 (or October 15 if you file for an extension — these occur automatically if you are deployed) so we’ll take a look at some of the options you have available to ensure you can minimize your tax liabilities this year. As a member (or former member) of the military you probably have some very specific tax requirements. Did you PCS this year? Did you recently change your state of residency? Today we will look at options available to help you with your taxes and a few tips on how to get the most out of your tax refund!
WHATS AVAILABLE TO YOU?
- Installation Tax Centers: Installation tax centers exist on many bases and posts and can help you with your tax filing this tax season. Take a look at at your post directory to see if there is one near you. With online software becoming more common, however, the number of installation tax centers is on the decline.
- Military One Source: Military One Source provides a wealth of expertise for those members of the military looking for assistance with filing their taxes this year. The program provides MilTax consultants who have the necessary expertise to answer your tax questions. Need questions about hazardous duty pay or your re-enlistment bonus answered? They can help.
- Commercial Tax Services: TaxSlayer and TurboTax offer free tax software (Turbotax for E1-E9 only) for active duty military. A number of other companies offer free tax software for active duty military as well. Be sure to take a look at the offer prior to beginning use of the software. Some companies charge extra for state taxes or additional forms for specific tax needs such as itemized deductions.
- Other Options: If your taxes are particularly complicated given a specific investment portfolio or purchase of a home, for example, you may want to consider paying a tax professional to do your taxes. While this method is more expensive, it may be worth it if you find an excellent accountant who saves you money and helps you avoid potential liabilities.
HOW TO MAKE THE MOST OF YOUR TAXES THIS YEAR
Now that we’ve looked at how to save you money preparing your taxes this year, we’ll take a look at how to make the most out of your return with a few important things to keep in mind this tax season. Additionally, if you want to really get into the details, take a look at the 2019 Armed Forces Tax Guide.
- Spouse State of Residency: Do you reside in a state with high state taxes and your spouse is being taxed in that state? Consider using the Military Spouse Residency Relief Act to enable him or her to claim the same state of residency as you. This could save you a lot if your state of legal residency doesn’t have an income tax.
- Itemizing vs. Standard Deduction: The standard deduction for married couples is $24,400 for 2019 and $12,200 for single individuals. Do you think you can write off more than based on your deductions for the year? Maybe you gave a car to charity or paid a significant amount of interest on your primary home last year? Consider itemizing your deductions if you can cross the standard deduction threshold as it could save you money.
- Combat Zone Tax Exclusion: The combat zone tax exclusion allows service members to exclude certain types of pay from their gross income if they received that pay in a combat zone. This includes active duty pay in a combat zone, re-enlistment bonuses, and hostile-fire pay.
- Don’t Include BAH and BAS in your income! These allowances are not taxable according to the IRS. If you are filing your taxes using tax software, do not include these in your income!
- Don’t Forget your PPM: Did you get reimbursed for a Personally Procured Move this year? Don’t forget to include that income in your state taxes, if applicable. Failure to do so could result in an audit.
- Contribute to your Roth IRA: You can still make your 2019 Roth IRA contribution of $6,000 ($7,000 if over 50) until April 15, 2020. Doing so enables you to save on capital gains taxes for capital gains in your Roth IRA. $
Enjoy the content of this post? Subscribe below to get the latest content delivered directly to your inbox!
Any accounting, business or tax advice contained in this communication is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.
Military Money Matters 