Tax Rules Affecting the Military, Part 2: Taxable Income
There are many military benefits and allowances that may or may not be taxable by local, state or federal governments. Learn about the taxable benefits that are available.
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Taxable Military Benefits
As a military service member, you earn money from several different allowances and benefits, and there are rules regarding which of these must be reported to the IRS as income and those which can be excluded. The following items must be included in your reported gross income, unless they were earned while you were serving in a combat zone. The good news is that military taxpayers who receive tax-free combat pay can include it as earned income when determining their earned-income credit and additional-child tax credit and for the purposes of making an IRA contribution.Basic Pay
- Active-duty pay, Reserve training and Guard drill pay
- Attendance at a designated service school
- Back wages
Special Pay
- Aviation career incentive
- Diving duty
- Foreign duty
- Medical, dental, pharmacy, optometry and veterinarian pay
- Nuclear-qualified officers
- Special-duty assignment pay
Bonuses
- Enlistment and re-enlistment
- Officer
- Career status
- Overseas extension
Other Payments
- High-deployment per diem
- Accrued leave
- Personal money allowances paid to high-ranking officers
- Student loan repayment from programs such as the Department of Defense Educational Loan Repayment Program (certain exemptions may occur if you serve in a combat zone during the repayment period)
