Filing taxes in the military works like any other federal return, with one difference that matters: the tax code sets aside real money for people in uniform, and most of it only pays out if you claim it. Combat pay is tax-free under 26 U.S.C. § 112, housing and food allowances never touch your taxable wages, active-duty moves still qualify for a deduction civilians lost in 2018, and deployment triggers automatic extensions on both filing and payment. The mistakes that cost service members money aren’t missed deadlines; they’re skipped elections and deductions.
Documents to Gather Before You File
Start with your Form W-2 from the Defense Finance and Accounting Service. Current and recent service members pull it through myPay, which stores the last four years of tax documents.1Defense Finance and Accounting Service. Tax Documents If you separated within the last 13 months, myPay still works; past that, request the W-2 through AskDFAS or by phone.2Defense Finance and Accounting Service. How to Get Your W2
Look at Box 12, code Q. That’s your nontaxable combat pay, and the number matters for the Earned Income Tax Credit election below. Then pull together any 1099-INT or 1099-DIV forms, Social Security numbers for every dependent, records of unreimbursed moving or travel costs, and, if you or your spouse earned money outside your legal residence state, that state’s wage records too.
If You’ll Be Deployed on Filing Day
A spouse who needs to sign or file a joint return on your behalf needs written authority. Under Treasury Regulation 1.6012-1(a)(5), another person may sign your income tax return if you’ve been continuously absent from the United States for at least 60 days before the filing deadline.3Internal Revenue Service. Instructions for Form 2848 IRS Form 2848 authorizes a representative, and a valid general power of attorney executed before you leave also works. Handle this before departure rather than trying to fix it from overseas.
Pay the IRS Doesn’t Tax
Combat Zone Exclusion
Serve in a presidentially designated combat zone for even a single day in a month, and your entire month of military compensation is excluded from gross income under 26 U.S.C. § 112.4Office of the Law Revision Counsel. 26 USC 112 – Certain Combat Zone Compensation of Members of the Armed Forces Enlisted members, warrant officers, and commissioned warrant officers get the full exclusion with no dollar cap. Commissioned officers receive the same exclusion, but capped monthly at the highest enlisted base pay plus any hostile fire or imminent danger pay received that month.5eCFR. 26 CFR 1.112-1 – Combat Zone Compensation of Members of the Armed Forces The exclusion extends to service members hospitalized from wounds sustained in a combat zone, for up to two years after combat operations end there.
Housing and Food Allowances
The Basic Allowance for Housing and the Basic Allowance for Subsistence are excluded from gross income entirely. They don’t show up in Box 1 of your W-2, and they aren’t subject to federal income tax, state income tax, Social Security, or Medicare.6Military OneSource. Military Housing Allowance and Your Taxes Since BAH and BAS can be more than 30 percent of total take-home pay, the exclusion is worth thousands of dollars a year. Check your Leave and Earnings Statement to confirm those amounts are being separated from taxable basic pay.
The Combat Pay Election for the EITC
This is where service members most often leave money on the table. Nontaxable combat pay, BAH, and BAS don’t count as earned income for the Earned Income Tax Credit by default. But the IRS lets you elect to include your nontaxable combat pay in earned income when calculating the EITC.7Internal Revenue Service. Military and Clergy Rules for the Earned Income Tax Credit For junior enlisted members with families, that election can materially increase the credit.
The rule is all-or-nothing: elect to include combat pay and you include all of it. On a joint return, each spouse makes the election independently, giving you four possible combinations. Run the numbers both ways and take whichever produces the larger credit. Your combat pay figure sits in Box 12, code Q, on your W-2.8Internal Revenue Service. Publication 596 (2025), Earned Income Credit (EIC)
TSP Contributions From Combat Pay
The Thrift Savings Plan behaves differently when you’re earning tax-exempt combat pay. The standard 2026 elective deferral limit is $24,500, but contributions from tax-exempt combat pay don’t count against that cap. They fall under the higher annual additions limit of $72,000, which covers your contributions plus agency automatic and matching contributions combined.9The Thrift Savings Plan (TSP). 2026 TSP Contribution Limits
The traditional-versus-Roth choice is unusually clear here. With traditional TSP, combat pay goes in tax-free (it’s already exempt) but earnings are taxed at withdrawal. With Roth TSP, combat pay contributions also go in tax-free, and qualifying retirement withdrawals come out tax-free too, earnings included. That creates money that is never taxed at any stage. For most service members deployed to a combat zone, Roth TSP is the stronger option unless you’re close to retirement with reasons to prefer traditional.
PCS Moving Expenses
The 2017 tax law removed the moving expense deduction for most Americans, but active-duty members who move under a permanent change of station still claim it. Unreimbursed costs go on Form 3903, and the deduction comes off adjusted gross income whether or not you itemize.10Internal Revenue Service. Instructions for Form 3903 Qualifying PCS moves include a move to your first post of duty, a transfer between permanent duty stations, and a move home after leaving the service.
Eligible expenses include:
- Packing, crating, shipping, in-transit storage up to 30 consecutive days (unlimited for overseas moves), insurance, vehicle shipping, and pet transportation.
- Transportation and lodging for you and household members while traveling to the new home, plus actual car expenses or the standard mileage rate, parking, and tolls.
Meals during the move aren’t deductible, and neither is anything the government already reimbursed through a non-taxable allowance. If the military covered part of the move and you paid the rest, only the unreimbursed portion counts. Keep receipts for everything the military didn’t handle directly.
Reserve and National Guard Travel
Reserve and Guard members who travel more than 100 miles from home for overnight drills or training deduct those travel costs as an above-the-line deduction on Schedule 1, without itemizing. Complete Form 2106 and attach it to your return.11Internal Revenue Service. Topic No. 511, Business Travel Expenses The deduction is capped at the federal per diem rate for lodging, meals, and incidentals, plus the IRS standard mileage rate for driving, along with parking, ferry charges, and tolls.12IRS. 2025 Instructions for Form 2106 – Employee Business Expenses You can’t exceed the per diem even if you spent more. Civilian employees lost this kind of unreimbursed business deduction after 2017, so it’s easy to forget it still exists for Guard members driving long distances to drill weekends.
State Residency and Where You Owe State Tax
The Servicemembers Civil Relief Act keeps states from taxing your military pay just because you’re stationed there under orders. You keep your state of legal residence for tax purposes regardless of how many times the military moves you, and the protection covers personal property like your car as well.
The Military Spouses Residency Relief Act extends similar protection to spouses, letting them claim the service member’s state of legal residence for state income tax on their own earnings. Amendments through the Veterans Benefits and Transition Act let a spouse elect the service member’s state of residence even if the spouse has never lived there.
Those protections have limits. Rental property income is generally taxable in the state where the property sits. A service member’s non-military side income, like freelance work or a second job, may be taxable in the state where it’s earned rather than the state of legal residence. If you or your spouse earn income outside your duty station state or legal residence state, check whether a third state has a claim. Keep your residency documents consistent; a Texas tax residency paired with a Virginia driver’s license and North Carolina voter registration invites questions.
Filing Deadlines and Automatic Extensions
The federal deadline is April 15, but military circumstances push it back automatically in two situations.
Stationed Outside the United States
If you’re on duty outside the United States and Puerto Rico on April 15, you get an automatic two-month extension to June 15 without filing anything.13Internal Revenue Service. U.S. Citizens and Resident Aliens Abroad – Automatic 2-Month Extension of Time to File Attach a statement to your return explaining you qualified. One catch: no late-filing penalty applies, but interest on unpaid tax still accrues from April 15.14Internal Revenue Service. U.S. Citizens and Resident Aliens Abroad If you owe, pay as close to April 15 as possible.
Need more time past June 15? File Form 4868 before that date to push the deadline to October 15, check the box on line 8 for out-of-country filers, and estimate your tax on line 4.15IRS. Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
Serving in a Combat Zone or Contingency Operation
The strongest relief goes to service members in designated combat zones or contingency operations. Under 26 U.S.C. § 7508, the IRS suspends filing and payment deadlines for the entire time you serve in the zone plus 180 days after you leave or are released from qualifying hospitalization.16Office of the Law Revision Counsel. 26 USC 7508 – Time for Performing Certain Acts Postponed by Reason of Service in Combat Zone or Contingency Operation No interest or late-payment penalties accrue during that period. The suspension covers filing returns, paying tax, contributing to an IRA, and other time-sensitive tax actions. Keep copies of your deployment orders as proof of dates.
Where to File Your Return
MilTax, from the Department of Defense, is free tax software built around military situations: deployments, combat pay exclusions, PCS moves, and multi-state filings. It covers one federal return and up to three state returns, and it includes access to tax consultants. Active-duty members, eligible family members, survivors, and veterans within 365 days of separation all qualify.17Internal Revenue Service. Free Online Tax Help for Military Members and Their Families
The Volunteer Income Tax Assistance program operates on many installations with preparers trained on military tax issues. For the 2026 filing season, IRS Free File is available to anyone with an adjusted gross income of $89,000 or less, and some Free File partners specifically list military status as a qualifying factor.18Internal Revenue Service. 2026 Tax Filing Season Opens With Several Free Filing Options Available
E-filing with direct deposit is the fastest way to get a refund. The IRS processes most e-filed returns and issues refunds in fewer than 21 days.19Internal Revenue Service. Direct Deposit Fastest Way to Receive Federal Tax Refund Paper returns take much longer, and the IRS won’t begin researching a mailed return’s status until at least six weeks have passed.20Internal Revenue Service. Why It May Take Longer Than 21 Days for Some Taxpayers to Receive Their Federal Refund