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Deferment & Deductions

DEFERMENT OF PAYING TAX

  • Not in a combat zone – If you are on active duty you may request a deferment of time for paying your taxes if your financial condition is the result of your active duty status. (You left a higher paying civilian job to be on active military service.) You will then be allowed 180 days after you leave military service to pay the tax. You will not be charged interest or penalties for that period.
  • If you were self employed before entering military service the deferment does not apply to self-employment taxes i.e. social security and Medicare payments.
  • In a combat zone – If you are serving in a combat zone you have an automatic deferment of time for paying the taxes for 180 days after you leave the zone. This can be extended to up to 270 days if serving in a combat zone has created a financial hardship. You will need to notify the IRS of your status. They have set up a special email account: combatzone@irs.gov to update the IRS on your combat zone status. Interest and penalties will not accrue during the deferment period.
  • Search www.irs.gov for "combat" and see extensive results on combat zones, pay, deferments, and more!  

 

DEDUCTIONS FOR AIR WING PERSONNEL ON TEMPORARY ORDERS

If you are PCS to a ship this discussion does not apply as the ship is your tax home and no expenses are deductible when you deploy.

First of all you must be able to itemize your deductions.

  • Each time you are on TDY orders and are not fully reimbursed but have expenses paid out of pocket for meals, lodging, or transportation you have deductible business expenses.
  • In lieu of meal receipts you may use federal per diem rates for the location that you travel to. You must have actually purchased the meals. If meals are provided without charge, you are not eligible for a meals deduction on your taxes.
  • Sometimes, and particularly in overseas deployments, you may deduct the difference between the per diem paid and the federal rate for that location.

You must keep records: your TDY orders and the accounting records reflecting amounts paid to you. Print these out if you are not given a printed copy or ask your disbursing clerk how you may obtain duplicates of the accounting documents. Without these records you will loose deductions.

You must have actual receipts to deduct unreimbursed lodging expenses. You may not deduct federal per diem rates for lodging.

  • Admin fees paid to your squadron mess are lodging expenses.
  • Taxi expenses that are less than $75 per day can be logged in lieu of a receipt.
  • Laundry, tips, and phone calls are also deductible when you are TDY.

Since MyPay only keeps records on line for a limited time, download the orders and the accounting documents after each TDY assignment.

These deductions have limits. The meals expense is first reduced by 50% then the total of all travel expense away from home and investment and tax prep expense must exceed 2% of adjusted gross income.

In addition to these travel expenses other employment related expenses are allowable. These include: squadron mess dues, not ships mess (that is a meals expense), nonliberty uniforms insignia and devices, swords, tools of the trade, safety or protective gear, and other ordinary and necessary business expenditures. See our tax worksheets for other items.

First Time Homebuyers Tax Credit is extended for one year for active duty personnel. If you were serving outside the continental U.S. in 2009 and 2010 and unable to buy a personal residence, you have until April 30, 2011 to buy a home and get it under binding contract. If you do, and have not owned a personal residence in three prior years, you may be eligible for an $8,000 tax credit.

For additional information see IRS website for combat zone information.