Your Guide to Military Taxes: Tips & Deductions Every Service Member Should Know

Members of the armed forces deal with tax situations most taxpayers never have to think about, including deployments, frequent moves, special pay types, and complicated state tax rules. Thankfully, the IRS offers several military tax benefits designed to lighten the load a little bit.

Whether you’re active duty, in the National Guard, a reservist, or a military spouse, understanding how military taxes work can help you protect your paycheck, avoid surprises, and maybe even boost your tax refund. Below, we break down the most important military tax breaks, followed by answers to common FAQs.

Is military pay taxable?

Yes, military pay is generally considered income for tax purposes, meaning it is subject to federal income tax and must be reported on your income tax return. That said, not all types of military income count as taxable income.

Examples of taxable military pay:

Basic pay for active-duty military service
Drill pay and training pay
Back wages
Bonuses and incentive pay (unless specifically excluded)

For specifics on the above, check out the IRS’s list of pay included in gross income for service members.

Examples of nontaxable military pay:

Combat pay earned in a designated combat zone (rank-dependent — more on this below), even if that pay would otherwise be taxable, including:
- Reenlistment bonusesPay for accrued leaveAwards
- Student loan repayments (excluding the Active Duty Health Professions Student Loan Repayment Program)
Basic Allowance for Housing (BAH)
Basic Allowance for Subsistence (BAS)
Family allowances
Some moving expenses and travel allowances
Special pay (hostile fire pay, imminent danger pay, hardship duty pay, etc.)

These nontaxable exclusions to income reduce your gross income, which can lower your federal tax bill. See IRS Publication 3 for a detailed list of government pay excluded from gross income for service members.

If you aren’t sure how much of your military pay can be excluded from your gross income, there’s no need to stress. When you e-file using tax preparation software like TaxAct®, we walk you through the entire reporting process and fill out the necessary tax forms for you.

How is combat pay treated for income tax purposes?

You can exclude combat pay from your taxable income as an enlisted member or warrant officer serving in a qualified combat zone. For commissioned officers (excluding commissioned warrant officers), the exclusion is capped at the highest rate of enlisted pay, plus hostile fire or imminent danger pay, for each month where you served in a combat zone or were hospitalized because of your service there.

Tax Tip: Even though the combat zone exclusion makes combat pay tax-free, you can still elect to include it as earned income when calculating credits that require you to have earned income, like the Earned Income Tax Credit (EITC). Doing so can sometimes increase your tax credit and, in turn, your tax refund. See IRS Pub 3 for details and examples.

Military tax deductions and other military tax breaks

As a service member, you may qualify for other military tax deductions in addition to the combat zone exclusion. Here are some deductions and credits that can lower your taxable income.

Tax break	Amount	Who may qualify?	Where to report	Notes
Travel expenses	All unreimbursed expenses from the time you leave home until you return home.	Reserve members of the Armed Forces	Form 2106, Employee Business Expenses, then Schedule 1 (Form 1040), line 12	Must travel more than 100 miles away from home.
Moving expenses	All reasonable, unreimbursed moving costs	Active-duty military member who moved due to a permanent change of station (PCS) order	Form 3903, Moving Expenses, then Schedule 1 (Form 1040), line 14	Applies to unreimbursed moving costs only.
Earned Income Tax Credit (EITC)	Anywhere from $649 to $8,046 depending on income and family size. Fully refundable.	Eligible low-to-moderate income service members	Form 1040 (plus Schedule EIC for any qualifying children, if applicable)	You must have earned income to qualify (can count combat pay as income for EITC purposes). Certain states also offer their own EITCs.
Home sale exclusion	Up to $250,000 ($500,000 for joint filers)	Homeowners who sold their home during the tax year	Schedule D (plus Form 8949 for any gain that can’t be excluded, if necessary)	Special eligibility rules apply for military service members on qualified extended duty.
Student loan interest	Up to $2,500	Eligible borrowers	Schedule 1 (Form 1040)	Subject to income limits

TaxAct can help you claim all of these deductions and fill out the necessary tax forms for each when you e-file using our tax software.

Now let’s take a closer look at some of the military-specific tax deductions listed above.

Travel expenses for Armed Forces Reservists

If you’re a member of the National Guard or military reserves and travel more than 100 miles from home for duty, you may deduct unreimbursed travel expenses, including:

Transportation (airfare, mileage, tolls)
Lodging
50% of meal expenses (subject to federal per diem limits)

These expenses are considered an adjustment to income, which means you do not need to itemize to claim them on your federal income tax return.

Unreimbursed moving expenses

Most civilians can no longer deduct unreimbursed moving expenses, but the IRS has an exception for active-duty military members.

If you move due to military orders resulting in a permanent change of station (PCS), you may deduct certain unreimbursed moving expenses as an adjustment to income (no need to itemize).

Qualifying moving expenses may include:

Mileage, airfare, or other transportation costs
Packing and shipping expenses (including insurance)
Moving trailer rentals and in-transit storage
Lodging during the move (meals are not deductible)

See Pub. 3 on irs.gov for a full list of deductible moving expenses and their limitations.

Are military uniforms tax-deductible?

No, unfortunately, uniform purchase, cleaning, and maintenance costs are no longer deductible for military personnel at the federal income tax level ever since the Tax Cuts and Jobs Act went into effect in 2018.

However, some states (like California) still allow a state income tax deduction for required uniforms that can’t be worn off duty. These deductions are claimed on state returns, not your federal tax return, and itemization rules vary by state.

When you file with TaxAct, we can help you identify any state tax deductions you may qualify for and apply them correctly on your state income tax return, so you don’t miss out on potential tax savings.

Penalty-free retirement withdrawals for service members

Under special IRS rules, qualifying service members can take early withdrawals from retirement accounts without the usual 10% penalty if military service materially affects their finances.

This applies to certain hardship distributions tied to military orders, deployments, or financial strain related to military service. The withdrawal may still be subject to income tax, but avoiding the additional 10% penalty can make a big difference.

Servicemembers Civil Relief Act (SCRA) protections

The SCRA provides several financial protections for active-duty service members, including additional military tax benefits. Here are some big ones:

Interest rate caps on IRS balances for active duty military taxes

If your ability to pay taxes is materially affected by duty, interest on unpaid federal tax balances may be capped at 6%.

This protection can apply to:

Existing income tax debt
Certain penalties and interest charges

To qualify, you generally must notify the IRS and provide a copy of your military orders. When applied, this cap can significantly reduce the long-term cost of carrying a balance while serving.

Deferred income taxes while on active duty

In some cases, the SCRA also allows eligible service members to request a deferral of income tax payments if military service materially affects their ability to pay.

A tax deferral doesn’t eliminate your tax owed, but it allows you to postpone payment without additional penalties. Taxes can be deferred up to 180 days after your release from service.

Tax relief for surviving family members

The tax code also provides important tax benefits for surviving family members when a service member dies while serving.

If survivors receive a $100,000 death gratuity after a service member dies during active-duty military service, that payment is not taxable income and does not need to be reported on a federal income tax return.

In addition, if a service member dies while on duty in a combat zone or in support of a combat operation, the service member’s tax liabilities to the IRS are forgiven. This includes tax for the year of death and, in some cases, prior years as well.

Military state taxes

State of residence

Frequent relocations don’t mean you have to change your legal residence every time you move. Under federal law and the Military Spouses Residency Relief Act, both service members and military spouses may be able to keep their original state of residence for state tax purposes.

If you’re stationed in a state where you’re a nonresident, that state generally can’t tax your military pay. If state income tax is withheld anyway, you can file a state return to claim a refund. TaxAct can help you with this if need be.

What states don’t tax military retirement?

Many states fully or partially exempt military retirement from state income tax, meaning the rules differ widely by state, which can cause a lot of confusion. Rules can also vary by income level and age. As of tax year 2025:

States with no income tax at all

These states don’t tax any income, including military retirement pay:

Alaska
Florida
New Hampshire
Nevada
South Dakota
Tennessee
Texas
Washington
Wyoming

States that don’t tax military retirement benefits

Even though these states have state income taxes, military retirement benefits are exempt: Alabama, Arizona, Arkansas, Connecticut, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, West Virginia, and Wisconsin.

Utah is its own special case. Instead of an exemption, Utah offers a refundable tax credit that can eliminate state taxes on military retirement pay.

States that partially tax military retirement benefits

California
Colorado
Delaware
Georgia
Idaho
Kentucky
Maryland
Montana
New Mexico
Oregon
Vermont
Virginia
Washington, D.C.

Tax filing for members of the military

TaxAct offers free federal and state filing for active-duty military members to help make tax filing easier and more affordable for those who serve. To apply this offer when filing your individual income tax return with us, simply enter an eligible Employer ID Number when our tax software asks for it.

With TaxAct, you can:

E-file your federal tax return and most state returns.
Handle complex military tax situations like PCS moves, combat pay, and multi-state filings.
Get step-by-step guidance through tax forms, deductions, and credits.

Military tax FAQs

What deductions and credits are unique to military personnel?

Some tax deductions are available only to service members, including deductions for unreimbursed travel expenses for reservists, PCS-related moving expense deductions for active-duty military members, and special rules that allow certain pay (like combat pay) to be excluded from taxable income.

While there are no special federal military tax credits, military taxpayers may qualify for credits available to all taxpayers, such as the EITC or education credits, but with added flexibility that can improve eligibility or credit amounts.

How do credits like the Earned Income Tax Credit (EITC) work for military taxpayers?

The EITC is a refundable tax credit designed to help low-to moderate-income workers. But military personnel get an extra benefit: You may choose to include nontaxable combat pay as earned income when calculating the credit.

Including combat pay in your EITC calculation doesn’t increase your taxable income, but it can increase your tax refund if it results in a larger EITC. If this sounds confusing, don’t worry — TaxAct can walk you through this process and help you get the tax savings you deserve.

Can I get more time to file my taxes if I’m deployed or serving in a combat zone?

Yes! If you’re stationed outside the U.S. on active duty military orders (but not in a designated combat zone), the IRS automatically gives you an extra two months to file your federal income tax return. That typically moves the deadline from April 15 to June 15, and you don’t need to file an extension request. However, any income tax you owe is still due by the original April deadline to avoid owing interest. If you need even more time, you can request an additional filing extension, which may give you up to Oct. 15 to file.

If you’re serving in a designated combat zone, you have 180 days from either the date you return from the combat zone or from your last date of continuous hospitalization for injuries received while serving in a combat zone to file your return. The 180 days are in addition to the number of days you had left to file when you entered the combat zone. During this extension, no interest or penalties are charged to you.

As for state extensions, many states follow similar rules, but state tax extensions vary, so it’s important to check your state’s rules.

Why is military retirement taxed so high?

Military retirement pay can feel highly taxed because active-duty pay is often a mix of taxable and tax-free income, while retirement pay is typically fully taxable as a pension. Military retirees may find themselves paying state income tax in addition to federal income tax, depending on where they live.

Some retirees may feel the tax impact more strongly because withholding may be lower during the year, leading to a balance due at filing time. You can change your military retirement pay withholding by calling the Retiree Pay customer service number at (888) 332-7411 or by making changes online via the Defense Finance & Accounting Service’s myPay website.

The bottom line

Military service comes with unique financial challenges, but the IRS offers several military tax benefits to help ease the burden. From combat pay exemptions to deductions for travel and moving expenses, there are various ways service members can reduce their taxable income. When you’re ready to file, TaxAct makes it easy to handle your military tax claims — so you can file accurately, claim your deductions, and get back to what matters most.

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.

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Meghen Ponder: Meghen Ponder is an editorial writer for TaxAct who specializes in writing content about finance and taxes. She enjoys decoding the intricacies of the tax world and helping others answer their tax questions.