Hi, I’m Bette Hochberger, CPA, CGMA, and Veteran’s day 2021 is approaching. The complicated life of military personnel and their families doesn’t get any less complex during tax season, so I figured I would try to uncomplicate it for you by sharing some of the unique tax rules that apply to active and retired military. I will also briefly touch on the work opportunity tax credit (WOTC) available as an incentive for employers looking to hire a qualified veteran. Let’s get started.
So, the first thing you need to know is if you are eligible for military tax benefits. According to the IRS, you may qualify for military tax benefits if you are a US Army, US Navy, US Air Force, US Marine Corps, US Coast Guard, or the US Space Force. Aside from armed forces, some uniformed services and support organizations are also eligible.
Once you find out if you are eligible, you should know that combat pay and your basic allowance for housing and subsistence are non-taxable forms of income! Non-taxable means that you do not have to claim that income on your taxes unless you decide that claiming it would work best for your specific tax situation (such as claiming the Earned Income Tax Credit).
In a normal tax situation, filing an extension is necessary to file “late,” and it doesn’t excuse late payments; however, if you are a qualified military member stationed abroad or in a hazardous zone, you will have an automatic extension that gives you at least 180 days once you leave your station to file and pay!
With so many people moving to Florida, I get asked about moving expenses often. Moving expenses usually must be proven using a time a distance test. Because of the 2017 Tax Cuts and Jobs Act, most taxpayers aren’t eligible for this deduction; however, if you are moving because your station is moved. Instead, you need to file form 3903 to get those moving expenses reimbursed.
To take a deeper look at and find more credits and deductions available for current and former military, go to www.irs.gov/individuals/military.
Now, what if you are an employer looking to hire a veteran? Well, there are benefits available for you also! The Work Opportunity Tax Credit (WOTC) allows employers to hire certain groups who struggle to gain employment due to unfortunate circumstances. The IRS specifies that to acquire the WOTC, you must hire qualified veterans. You can find the qualifications on the IRS website.
So, hire a veteran and don’t miss out on these tax credits. That is all I have for this Veteran’s Day Quickie, be sure to like and comment if you found this video helpful. Thank you for joining; I will see you all next time.