6 Facts for Military Spouse Taxes

Tax Tips for Military Spouses

Military spouses face a lot of challenges – and filing your taxes may be one of them. It’s normal to feel overwhelmed if you don’t understand how tax laws apply to you. If this is the first time you’ve filed taxes for your military household, there are some important things to know. Here are answers to tax questions that only a military spouse would need to ask. 

Do military members have to pay taxes?  

Yes. A service member’s pay is broken down by type. Some of it is tax free, but some of it is taxable. Your spouse’s base pay is taxable unless they are serving in a declared tax-free combat zone. There is also tax for Special Pay (special duty, hardship duty, imminent danger), Bonus Pay (reenlistment, career status change, overseas extension), and Incentive Pay (flight, hazardous duty). Things that are not taxed include your BAH (Basic Housing Allowance), BAS (Basic Subsistence Allowance), OHA (Overseas Housing Allowance), and certain disability payments.  

What filing status should a military spouse choose? 

Because you are married, you have the option to file together or separately. If you are filing one return for both of you, you’ll find the tax information you need – like your spouse’s W2 – on MyPay.

When you file jointly, the return typically must be signed by both spouses. However, if yours can’t sign due to a deployment, for example, you can use a power of attorney to file while they are away.  

There are some situations where filing separately is beneficial, but it could also make you ineligible for certain tax breaks, like the Earned Income Tax Credit (discussed below).

The standard deduction nearly doubled under the new tax laws for 2018-2025. If you file jointly, your deduction is $24,800. If you file separately, the deduction is $12,400.  

Read more about filing taxes separately when you are married. 

We just moved duty stations. Which state do we file in?  

For your federal income taxes, you should file your federal tax return according to your duty station.  

Your state of legal residence (SLR) – the place you expect to live when your spouse leaves the military – is where you should file your state income taxes. Your spouse’s military pay is taxable by their state of legal residence. Military pay is not subject to income tax in the state where you are stationed (unless it is also your state of legal residence). But if your spouse earns non-military income from a second job, they could owe income tax in the state where you are stationed.  

Are moving expenses still deductible for military after tax reform?  

Yes. If your spouse is on active duty and receives orders for a permanent change of station (PCS), any moving expenses that are not reimbursed or paid for by the government are deductible from your federal income taxes.  

A new tax law signed in 2018 eliminated this deduction for civilian taxpayers through 2025. But the provision remains intact for military.  

Note: Your spouse’s uniform is most likely not deductible.  

Also note: Your spouse cannot deduct the mileage they drive from home to their daily job. 

I had a job before we PCS’ed. Can I file in my home state?   

When your spouse receives orders to move out of state and you relocate to live with them, you can still claim residency in your home state for tax purposes. This could save you a lot of money if you lived and earned income in a state with no income tax. 

Can we claim the Earned Income Tax Credit if my spouse is in the military?  

Yes, military families may be eligible to claim the Earned Income Tax Credit. The EITC is a tax benefit for people earning low to moderate income.   

To qualify for the credit, your total adjusted gross income must be less than the following amounts: 

  • $57,414 if you have three or more children 
  • $53,865 if you have two children 
  • $46,108 if you have one child 
  • $21,920  if you have no children 

The amount of EITC you could receive for tax year 2020 (the return you’ll file in 2021) are:  

  • $6,728 with three or more qualifying children 
  • $5,980 with two qualifying children 
  • $3,618 with one qualifying child 
  • $543 with no qualifying children 

If your spouse receives combat pay, it is usually exempt from tax. But for the purposes of the EITC, you could choose to include it in your taxable income instead. In some cases, this could increase the amount you receive for your credit.    

The information in this article is up to date through tax year 2020 (taxes filed 2021). 

This article is intended to provide general information to the public and does not provide personalized tax, investment, legal, or business advice. You should seek the assistance of a professional for advice on taxes, investments, and any other financial, legal, or business matter pertinent to your individual situation.

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