Military Tax Write-Offs: Deductions and Benefits You Should Know

Military personnel have access to unique tax benefits that reduce taxable income and maximize deductions. These tax breaks recognize the financial challenges of service members, whether on active duty, in the reserves, or deployed overseas. Understanding these opportunities can lead to significant savings when filing taxes.

Several key deductions and exclusions apply specifically to military members, including housing costs, uniform expenses, and travel reimbursements. Others provide relief for those serving in combat zones or pursuing further education. Knowing what applies to your situation ensures you don’t miss valuable tax advantages.

Housing-Related Deductions

Military personnel often face unique housing situations, and the tax code offers deductions and exclusions to help offset costs. The Basic Allowance for Housing (BAH) is not considered taxable income, meaning service members receiving it do not need to report it on their tax returns, reducing overall taxable income. The amount varies based on rank, location, and dependency status but can cover a substantial portion of housing expenses.

For homeowners, the mortgage interest deduction remains a valuable tax break. Service members who itemize deductions can deduct interest paid on a mortgage for a primary residence, subject to the same limits as civilian homeowners. As of 2024, interest on mortgage debt up to $750,000 is deductible for those who purchased homes after December 15, 2017. Property taxes paid on a home can also be deducted.

The Capital Gains Tax Exclusion benefits military homeowners selling property. Normally, to exclude up to $250,000 ($500,000 for married couples) of capital gains from a home sale, the owner must have lived in the home for at least two of the last five years. Military members can suspend this time requirement if they are on qualified official extended duty, allowing them to maintain eligibility for the exclusion even if stationed elsewhere.

Uniform and Equipment Costs

Military personnel often purchase and maintain uniforms and gear necessary for duty. While some expenses are reimbursed, others must be paid out of pocket and may be eligible for tax deductions. The IRS allows service members to deduct the cost of uniforms not suitable for everyday wear, as well as upkeep expenses like dry cleaning and alterations. This applies to dress uniforms, combat gear, and other specialized attire mandated by military regulations but not covered by an allowance.

Beyond clothing, many service members invest in professional equipment required for their roles. Items such as tactical gear, protective eyewear, and specialized tools may not be fully issued by the military, leaving individuals responsible for purchasing them. If these items are necessary for official duties and are not reimbursed, they can be deducted as unreimbursed employee expenses. However, since the Tax Cuts and Jobs Act of 2017 suspended miscellaneous itemized deductions for most taxpayers, these expenses are generally only deductible for reservists traveling more than 100 miles for duty or under specific circumstances where they qualify as business expenses.

Combat Pay Exclusions

Military personnel serving in designated combat zones receive a significant tax benefit in the form of combat pay exclusions. This allows enlisted service members, warrant officers, and commissioned officers to exclude a portion—or in some cases, all—of their combat pay from taxable income. The IRS determines eligibility based on official combat zone designations made by the Department of Defense, with locations such as Afghanistan, Iraq, Syria, and the Sinai Peninsula currently qualifying as of 2024.

The exclusion applies to base pay earned during any month a service member spends time in a combat zone, even if only for a single day. For enlisted personnel and warrant officers, all combat pay is excluded from gross income, while commissioned officers have a cap set at the highest enlisted pay rate plus imminent danger pay, which totals $10,586.70 per month in 2024. This tax-free treatment reduces overall taxable income and may lower tax brackets.

Beyond federal taxes, the exclusion often extends to state income taxes, depending on individual state laws. Some states automatically follow federal guidelines, while others have specific provisions for military income. Service members should verify their state’s treatment of combat pay to ensure they are not overpaying. Since combat pay is not included in adjusted gross income (AGI), it can also influence eligibility for tax credits like the Earned Income Tax Credit (EITC), which provides financial relief to lower-income taxpayers. Reduced taxable earnings may qualify service members for a larger EITC refund.

Reservist Travel Write-Offs

Reservists often face significant travel expenses when reporting for duty, especially when assigned to locations far from home. The IRS allows eligible reservists to deduct unreimbursed travel costs when commuting more than 100 miles to a drill location. Unlike standard employee business expenses, which were largely eliminated for most taxpayers under the Tax Cuts and Jobs Act of 2017, this deduction remains available as an adjustment to income, meaning it can be claimed without itemizing deductions.

Qualifying expenses include transportation costs such as airfare, train tickets, or mileage for personal vehicle use, calculated at the IRS standard mileage rate of 67 cents per mile for 2024. Lodging costs incurred while staying overnight for training are also deductible, along with 50% of meal expenses. These deductions apply even if the reservist stays with family or rents accommodations, provided the expense is directly related to fulfilling military obligations.

Education Fee Deductions

Pursuing higher education can be a significant financial commitment, but military personnel have access to tax benefits that help offset costs. The IRS provides deductions and credits that reduce the financial burden of tuition, fees, and other education-related expenses. Service members using personal funds for education, rather than military tuition assistance programs, may qualify for these tax breaks.

The Tuition and Fees Deduction allows eligible service members to deduct up to $4,000 in qualified education expenses from taxable income. The Lifetime Learning Credit (LLC) provides a credit of 20% of the first $10,000 in tuition and fees, up to a maximum of $2,000 per tax return. Unlike the American Opportunity Tax Credit (AOTC), which is limited to undergraduate education, the LLC applies to graduate courses and professional certifications.

The GI Bill and other military education benefits do not count as taxable income, but they can impact eligibility for certain tax credits. If tuition is fully covered by the Post-9/11 GI Bill, a service member may not have enough out-of-pocket expenses to claim the AOTC, which provides up to $2,500 per year for the first four years of higher education. However, those who pay additional costs beyond what their benefits cover may still qualify for deductions or credits.

Extension Options During Deployment

Deployments can complicate tax filing, but the IRS provides automatic extensions and special considerations for military personnel serving in combat zones or overseas assignments. These provisions ensure service members are not penalized for missing tax deadlines.

The automatic filing extension grants deployed personnel an additional 180 days to file tax returns after leaving a combat zone. This extension also applies to tax payments, so service members do not incur late fees or interest during this period. Those stationed outside the United States but not in a combat zone receive an automatic two-month extension to file returns, though interest on unpaid taxes may still accrue.

Military personnel can designate a spouse or trusted individual as their power of attorney to handle tax matters. IRS Form 2848 allows a representative to file returns, make payments, and communicate with the IRS while the service member is deployed, ensuring tax obligations are managed without disruption.