As a member of the United States Armed Forces, you may have some of the following special tax considerations.

Taxable Income

Some of the Items that are Nontaxable

Moving Expenses

Combat Pay

Extensions

Exclusion of Gain from a Home Sale

Overnight Travel Expenses for National Guard and Reserve Members

Taxable Income for Military Personnel*

Active duty pay
Special pay (aviation, diving, etc.)
Reserve training pay
Enlistment and re-enlistment bonus
Armed Services academy pay
Accrued leave or mustering-out payments
Lump sum payments made upon separation or release
Student loan repayments
* Unless the pay is for service in a combat zone as designated by the President.
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Some of the Items That Are Nontaxable

Pay for active service while in a combat zone or a qualified hazardous duty area
Living allowances, such as BAH (Basic Allowance for Housing) and BAS (Basic Allowance for Subsistence)
Disability benefits
Medical benefits
Educational assistance
Family separation allowances
OHA (Overseas Housing Allowance)
Temporary lodging for certain orders
Uniform allowances
Moving allowances
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Moving Expenses
As a member of the Armed Forces, if you move because of permanent change of station, you do not have to meet the usual time and distance tests to deduct moving expenses. You do not report the value of the moving expenses unless the reimbursements are more than the expenses. You can deduct reasonable unreimbursed moving expenses for moving household goods and personal effects and reasonable travel and lodging expenses.
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Combat Pay
If you are a member of the United States Armed Forces serving in a combat zone, some of your pay may be excluded from income. Even if you only serve for one day out of the month in a combat zone, the entire exclusion for that month is allowed. Examples of excludable income include active duty pay earned in the month you served in a combat zone, imminent danger/hostile fire pay, and a re-enlistment bonus if the re-enlistment occurs in the month you serve in a combat zone. A combat zone is an area designated by the President of the United States to be an area in which the United States Armed Forces are engaging or have engaged in combat. You do not need to claim the combat zone exclusion on your tax return because this type of income has usually already been excluded from your wages. The wages shown in your Form W-2, Wage and Tax Statement, Box 1 should not include military pay excluded from your income under the combat zone exclusion provisions. If it does, you will need to get a corrected Form W-2 from your finance office. You cannot exclude as combat pay any wages shown in Form W-2, Box 1.
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Extensions
You can receive an automatic four-month extension to file your return by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, by the regular due date of your return. You can qualify for an automatic extension of time until June 15 without filing Form 4868 if you are in the military or naval service on an assigned tour of duty outside the United States and Puerto Rico during a time that includes the due date of your return. Both of these extensions are for filing only, not for paying any balance due. Interest will be charged on any tax not paid by the regular due date of your return.

There is also an automatic extension for filing returns, paying taxes, filing claims for refunds, making timely contributions to an IRA, making estimated tax payments, and taking other actions with the IRS when serving in a combat zone or qualified hazardous duty area. This extension is generally 180 days from the total of the following:

The date you left the combat zone or hazardous duty area (or the last day the area qualifies as a combat zone or hazardous duty area)
The number of days remaining before the regular deadline, starting from the date you entered the combat zone or hazardous duty area
If you need any assistance with determining combat zones and qualified hazardous duty areas, please drop by your local Emerald Tax Service call (951) 275-9986 for the location nearest you. Our professionals are ready to help you with any questions you may have.
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Exclusion of Gain from a Home Sale
Normally, a taxpayer must have owned and lived in their home as a principal residence for two years of the five-year period ending on the date of sale of the home to be able to exclude $250,000 of the gain. However, if you were serving on qualified official extended duty in the military, you can elect to suspend (for up to 10 years) the five-year test period ending on the date of sale of your principal place of residence. This tax relief is retroactive to May 7, 1997; taxpayers may be able file an amended return if applicable.
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Overnight Travel Expenses of National Guard and Reserve Members
If a member of the National Guard or Reserves must travel away from home to perform their service (for example, for a drill or a meeting) in a location that is more than 100 miles away from their home, they are allowed a deduction for related travel expenses incurred even if they do not itemize their deductions. Allowable expenses include expenses for overnight transportation, meals, and lodging. The amount of the allowable expenses cannot exceed the federal government daily per diem amounts applicable for that location.