Taxo Military Tax Guide: Combat Pay, Moving, Deductions
Military Tax Guide: Combat Pay, Moving, and Special Deductions
Active-duty military members, reservists, and veterans have access to tax benefits that no civilian taxpayer can claim. Combat zone pay exclusions, the military-specific moving expense deduction, extended filing deadlines, and free VITA tax preparation on base are just the starting points. Understanding these benefits can save thousands of dollars annually.
Data Notice: Information in “Military Tax Guide: Combat Pay, Moving, Deductions” uses projected 2026 tax figures. IRS rules, thresholds, and deadlines are subject to change through legislation and annual inflation adjustments. Verify current data with official IRS publications and a licensed tax professional. [military-tax-guide]
This guide covers every federal tax benefit available to military members in 2026, organized by the type of benefit and the circumstances that trigger it.
Combat Zone Tax Exclusion
Military members serving in a designated combat zone can exclude some or all of their military pay from taxable income.
Exclusion Amounts for 2026
| Rank | Exclusion |
|---|---|
| Enlisted members | All military pay received during any month of combat zone service is excluded — no cap |
| Commissioned officers | Excluded up to the highest enlisted pay rate + imminent danger pay (~$10,500/month projected for 2026) |
| Warrant officers | Same as commissioned officers |
Designated Combat Zones (2026)
| Zone | Countries/Areas |
|---|---|
| Afghanistan | Afghanistan and airspace above |
| Arabian Peninsula | Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, UAE |
| Kosovo | Kosovo and adjacent areas |
| Sinai Peninsula | Sinai Peninsula of Egypt (qualified hazardous duty area) |
How It Works
If you serve in a combat zone for even one day during a month, your pay for the entire month is excluded. This rule applies to basic pay, reenlistment bonuses, special pay, and accrued leave payments.
Example: An E-6 with 10 years of service earns approximately ~$4,200/month in basic pay. Deployed to a combat zone for 8 months, approximately ~$33,600 in basic pay is excluded from federal income tax. At a 22% marginal rate, the tax savings is approximately ~$7,400.
Combat Zone and the EITC
Military members can elect to include combat zone pay as earned income for purposes of the Earned Income Tax Credit. Since combat pay is otherwise excluded, this election only makes sense if including it increases your EITC — run the numbers both ways.
Military Moving Expense Deduction
The Tax Cuts and Jobs Act eliminated the moving expense deduction for civilians, but military members retained it. Under the OBBB, this benefit remains in place for 2026.
Who Qualifies
Only active-duty members of the Armed Forces who move pursuant to a military order for a permanent change of station (PCS) qualify.
Deductible Moving Expenses
| Expense | Deductible? |
|---|---|
| Transporting household goods and personal effects | Yes |
| Travel (including lodging) from old home to new home | Yes |
| Mileage for personal vehicle (2026 rate: ~$0.22/mile for moving) | Yes |
| Storage of household goods (up to 30 days) | Yes |
| Meals during travel | No |
| House-hunting trips | No |
| Temporary housing at new location | No |
| Cost of breaking a lease | No |
How to Claim
File Form 3903 (Moving Expenses) and deduct the total as an above-the-line deduction on your 1040. This reduces AGI directly and does not require itemizing.
Example: A PCS move from Fort Bragg, NC to Fort Lewis, WA costs $3,500 in moving truck rental, $800 in lodging during the 5-day drive, and $550 in mileage for a personal vehicle. Total deductible: $4,850. The portion reimbursed by the military (dislocation allowance) is not taxable, and the unreimbursed portion is deductible.
Military Pay: What Is and Is Not Taxable
| Pay Type | Taxable? |
|---|---|
| Basic pay | Yes (unless combat zone exclusion applies) |
| Basic Allowance for Housing (BAH) | No |
| Basic Allowance for Subsistence (BAS) | No |
| Combat zone pay | No (see exclusion above) |
| Hazardous duty pay (non-combat) | Yes |
| Reenlistment bonus | Yes (unless in combat zone) |
| Uniform allowance | No |
| Family Separation Allowance | No |
| CONUS/OCONUS COLA | No (if paid as allowance) |
| Disability severance pay | Depends on disability percentage |
| Retired pay | Yes (unless VA disability compensation) |
| VA disability compensation | No |
The BAH and BAS Advantage
BAH and BAS are significant tax-free benefits. An E-7 stationed at a high-cost location like San Diego might receive ~$3,200/month in BAH and ~$450/month in BAS — approximately ~$43,800 per year in tax-free income. This effectively lowers the military member’s tax bracket compared to a civilian earning the same total compensation.
Extended Filing Deadlines
Military members receive automatic deadline extensions in several situations.
Combat Zone Extension
| Extension | Details |
|---|---|
| Filing deadline | Extended by 180 days after the later of: (1) last day in the combat zone, or (2) last day of a qualifying hospitalization from combat zone service |
| Payment deadline | Same extension — no interest or penalties during the extension period |
| Applies to | Filing, paying, claiming refunds, IRS assessments |
| Example | Leave combat zone on March 1, 2027 → filing deadline for 2026 return extends to approximately August 28, 2027 |
Deployment Extension (Outside Combat Zones)
Military members serving outside the U.S. (but not in a combat zone) receive an automatic 2-month extension (to June 15) to file and pay. A further extension to October 15 is available by filing Form 4868.
Review all relevant deadlines in our tax filing deadlines guide.
State Tax Exemptions for Military
State income tax rules vary significantly for military members.
States with No Income Tax
Alaska, Florida, Nevada, New Hampshire (wages), South Dakota, Tennessee (wages), Texas, Washington, and Wyoming impose no state income tax on military pay.
Military-Specific State Protections
| Protection | Details |
|---|---|
| Servicemembers Civil Relief Act (SCRA) | Military pay is taxed only by your state of legal residence (domicile), not the state where you are stationed |
| Military Spouses Residency Relief Act (MSRRA) | A military spouse can keep their domicile state for income tax purposes, even while living in the service member’s duty station state |
| State combat zone exclusion | Many states follow the federal exclusion; some exclude all military pay |
Example: A service member domiciled in Texas (no state income tax) stationed in California does not owe California income tax on military pay, thanks to the SCRA.
Popular Domicile States for Military
Many military members establish domicile in tax-friendly states:
| State | Income Tax on Military Pay | Other Benefits |
|---|---|---|
| Texas | None | No state income tax |
| Florida | None | No state income tax |
| Nevada | None | No state income tax |
| Washington | None | No state income tax |
Thrift Savings Plan (TSP)
The TSP is the military equivalent of a 401(k). Military members can contribute to the traditional TSP (pre-tax) or Roth TSP (after-tax).
2026 TSP Contribution Limits
| Limit | Amount |
|---|---|
| Employee contribution | ~$23,500 |
| Catch-up (age 50+) | ~$7,500 additional |
| Combat zone annual additions limit | ~$70,000 (combined employee + employer + tax-exempt) |
Combat Zone Roth Contributions
Combat zone pay contributed to the Roth TSP is particularly powerful: the contributions are made with already tax-free money, and the earnings grow tax-free forever. This is one of the most advantageous retirement savings strategies available to any taxpayer.
Free Tax Filing for Military
VITA on Base
The IRS Volunteer Income Tax Assistance (VITA) program operates on military installations worldwide. Trained volunteers prepare federal and state returns for free. Locations are available from February through April at most major bases.
MilTax
The Department of Defense’s MilTax program provides free tax preparation software for all military members, including:
- Federal return
- Up to 3 state returns
- Access to tax consultants by phone
- Available year-round
Free Filing Options
See the standard deduction guide and tax brackets guide to estimate your tax situation before filing.
Special Situations
Reservist Travel Deduction
Reservists who travel more than 100 miles from home for drill or training can deduct travel expenses (transportation, meals at 50%, and lodging) as an above-the-line deduction on Form 2106.
Military Disability and Retired Pay
- VA disability compensation is completely tax-free
- Military retired pay is taxable as ordinary income
- Concurrent Retirement and Disability Pay (CRDP): If you receive both, the VA portion remains tax-free
- Combat-Related Special Compensation (CRSC): Tax-free
Survivor Benefits
Survivor Benefit Plan (SBP) annuity payments are taxable income to the surviving spouse. Dependency and Indemnity Compensation (DIC) from the VA is tax-free.
Frequently Asked Questions
Do I have to file a state return where I am stationed? Not for military pay if it is not your state of domicile (per the SCRA). You may need to file in your duty station state for non-military income earned there.
Is my GI Bill housing allowance taxable? No. GI Bill benefits — including the housing stipend, tuition payments, and the book stipend — are tax-free.
Can I claim education credits while using the GI Bill? Expenses paid by the GI Bill cannot be used for education credits. Only out-of-pocket expenses above GI Bill coverage qualify.
What if I am deployed during tax season? The combat zone extension gives you 180 days after leaving the combat zone. Even outside combat zones, the automatic 2-month extension applies for overseas deployment.
Can my spouse file our return while I am deployed? Yes, with a valid power of attorney (Form 2848 for tax matters). The spouse can sign the joint return on behalf of the deployed member.
Key Takeaways
- Combat zone pay is excluded from federal income tax — enlisted members with no cap, officers up to the highest enlisted rate
- The military moving expense deduction survived the TCJA and OBBB — civilians cannot claim it
- BAH, BAS, and uniform allowances are tax-free, significantly lowering effective tax rates for military members
- Filing deadlines extend 180 days after leaving a combat zone, with no interest or penalties
- The SCRA protects military members from taxation by their duty station state on military pay
- MilTax and VITA provide free tax preparation for all service members
Next Steps
- Estimate your tax bracket with the 2026 tax brackets guide
- Review all deductions available to you in the complete tax deductions list
- Check tax filing deadlines for standard and military-specific extensions
- Explore the Earned Income Tax Credit guide — combat pay election may increase your credit
Educational content about military tax guide: combat pay, moving, deductions presented here is not a substitute for individualized professional tax advice. Tax regulations are subject to frequent change. Verify current rules with IRS.gov and consult a credentialed tax advisor for your specific needs.
About This Article
Researched and written by the Taxo editorial team using official sources. This article is for informational purposes only and does not constitute professional advice.
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