Tax Tips

Tax Tip

Overview

You don't have to report your Basic Allowance for Housing.
Certain educational expenses for dependents don't need to be reported to the IRS.
You may exclude certain travel and moving expenses.

Compensation for active service while in a combat zone is not included in gross income. The exclusion for a commissioned officer (other than a commissioned warrant officer) is limited. Military taxpayers who receive tax-free combat pay can include it as earned income when determining the Earned Income Credit and the Additional Child Tax Credit, and for purposes of making an IRA contribution.

Additionally, the following items are not included in gross income (even if the income was received as a reimbursement or an allowance).

Living Allowances

Basic Allowance for Housing — you can deduct mortgage interest and real-estate taxes on your home even if you pay these expenses with your BAH
Basic Allowance for Subsistence
housing and cost-of-living allowances abroad, whether paid by the U.S. government or by a foreign government
Overseas Housing Allowance

Family Allowances

certain educational expenses for dependents
emergencies
evacuation to a place of safety
separation

Death Allowances

burial services
death gratuity payments to eligible survivors
travel of dependents to burial site

Moving Allowances

dislocation
move-in housing
moving household and personal items
moving trailers or mobile homes
storage
temporary lodging and temporary-lodging expenses
Military Base Realignment and Closure Benefit

For the Military Base Realignment and Closure Benefit, the excludable amount can't be more than 95% of the fair market value of the property for which the payments were made (as determined by the Secretary of Defense before public announcement of intent to close all or part of the military base or installation) minus the fair market value of the property as determined by the Secretary of Defense at the time of sale.

Travel Allowances

annual round trip for dependent students
leave between consecutive overseas tours
reassignment in a dependent-restricted status
transportation for you or your dependents during ship overhaul or inactivation
per diem

Note: If you're a member of the reserves and you travel more than 100 miles away from home in connection with your duties as a member of the reserves, you can deduct your travel expenses as an adjustment to income rather than as a miscellaneous itemized deduction.