Tax Benefits Available to Military Personnel and Their Families

Some of the benefits that may be available to military personnel and their families include:

• Members of the armed forces serving in a contingency operation (as defined by the Secretary of Defense) are now eligible for the same extension deadline for filing and paying their taxes as members of the armed forces serving in a combat zone. The deadline for those individuals is 180 days after their last day in a combat zone.

• Individuals serving in the U.S. uniformed services or Foreign Service can elect to suspend the five-year period during which the two-year ownership and use requirements must be met.  Taxpayers can exclude gain from the sale of their main home may be suspended during the period the taxpayer or spouse served on “qualified official extended duty” as a member of the armed forces.

• Military base realignment and closure benefits paid to service men and women are now generally excludable from income. Specifically excludes from gross income for payments intended to compensate military personnel and certain civilian employees for a reduction in the fair market value (FMV) of their homes resulting from military or Coast Guard base closure or realignment.

• Benefits received after 2002 under a dependent-care assistance program now are nontaxable.

• In the unfortunate event of the death of a member of the armed forces, the death benefit paid to the survivor has increased to $12,000 and is all nontaxable.