I was just having a conversation with my folks about military service and the topic of taxes came up. Does anyone here know if military personnel are required to pay taxes while they're deployed? I'm a little bit confused and was hoping to get some clarity on this matter.
Yes, U.S. military personnel are typically required to pay taxes, even when they are deployed. However, there are numerous tax benefits and exclusions they could take advantage of due to their military status.
A significant one is the Combat Zone Tax Exclusion (CZTE). Under the CZTE, enlisted personnel, warrant officers, and commissioned warrant officers can exclude active duty pay earned in any month they served in a combat zone. For commissioned officers, the monthly exclusion is capped at the highest enlisted pay, plus imminent danger/hostile fire pay.
It's important to remember, though, that while basic pay might be excluded under the CZTE, other types of military compensation, like bonuses for re-enlisting, are still taxable.
Deployment outside the U.S. might also qualify personnel for a Foreign Earned Income Exclusion, where they could exclude a certain amount of their foreign earnings from their taxable income.
Another important tax consideration for military personnel, whether deployed or not, is that they often qualify for deadline extensions for filing and paying taxes.
It's best for military personnel to consult with a tax professional to understand what exclusions and benefits they might qualify for, as tax situations can be pretty complex. Reading IRS Publication 3, the Armed Forces' Tax Guide, could also provide more information on how military service impacts tax considerations.
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