The information in this article is up to date through tax year 2020 (taxes filed in 2021).
When you’re in the armed forces, you may moved to a new state every couple of years. If you were non-military, you’d become a resident of that state, and that’s where you would file your taxes. But for service members and their spouses, the tax implications of moving are not always so clear. Here are some important FAQs for military families preparing to PCS.
Is a DITY move taxable?
Any money you make off a DITY move is considered taxable income. The military automatically withholds 25% for taxes, and they send you a W-2 for the amount at tax time.
When you move yourself, you receive a certain amount of money based on the weight of your belongings and the distance you are required to move. This is meant to cover the expenses of your move (moving boxes and packing materials, gas, storage, etc.). If the amount you get for moving yourself is more than your actual total moving expenses, you typically get to keep the difference (a.k.a. DITY hazard pay). That “profit” is the amount that will be taxed.
Can I deduct moving expenses for a DITY move?
You can only deduct expenses from your move if they were not fully reimbursed or directly paid for by the government. Unreimbursed moving expenses that can qualify for a tax deduction include:
- The cost of packing, crating, and transporting your household goods
- The cost of connecting or disconnecting utilities
- The cost of shipping your car
- The cost of shipping your pets
- The lodging expenses on your way to your new home (does not include meals)
- The cost of storing and insuring household goods for up to 30 days after you leave your home
With a full or partial DITY, you are paid for your move based on weight x distance. This allotment is intended to cover your moving costs. If it does not, you may be able to deduct the above.
How do I report military moving expenses?
If you meet the requirements for the moving expenses deduction, you will need to complete Form 3903, Moving Expenses and attach Schedule 1, Additional Income and Adjustments to Income. Your deduction amount will be reported as an adjustment to income on Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors.
When you file with TaxSlayer, the information you provide will be used to calculate your deduction, and all the data is automatically entered into the correct tax form for your return.
Where do military spouses pay taxes?
Military spouses and service members pay state income and property tax to their state of legal residence.
As a spouse, you can choose to maintain your original state of residence (even if it is different from your service member spouse’s state of residence) if you meet these requirements:
- Your service member spouse is moving on orders to a new duty station outside of your home state
- You are moving to the duty station state to be with the service member
Can active duty military or military spouses file taxes in any state?
Not exactly. You must establish a state of legal residency, and that is the state where you will pay income and property tax. Your state of legal residency does not have to be the same state where you or your spouse are currently stationed.
Military spouses can use their service member’s state of legal residency as their own for state and local taxes and voting purposes, without being physically present in that state.
To claim a state of legal residency, you’ll need to prove that you intend to be a resident in the state. Typically, that means you’ll take at least one of the following steps:
- Titling and registering your car in the state
- Registering to vote
- Getting a driver’s license in the state
- Preparing your last will and testament
Active duty military can establish a new state of legal residency by submitting a DD Form 2058, State of Legal Residence Certificate. Buying a home at a new duty station does not automatically make you a resident of that state.
Did you know…? Service members with a military EIN can file a federal tax return for free with TaxSlayer. Click here to learn more.