Tax tips for the military—2002 – Law Review Number 68
Terrence J. Benshoof
It’s that time of the year when our thoughts turn to the dreaded April 15th: tax time. As members of the military Reserve and military organizations, there are a number of service-related deductions for which we may be eligible. During the 107th Congress, ROA was a strong supporter of additional tax relief for the Reservist, but the effort to pass such legislation, particularly that affecting deduction of non-reimbursed expenses related to Reserve duty, failed to reach compromise and died in committee. We will continue even more vigorously in our effort to get tax legislation passed in the 108th Congress.
Reservists are entitled to claim as deductions many expenses related to duty that are not reimbursed by the government. Unfortunately, most of these expenses are subject to the limitation of having to be in excess of 2 percent of the service member’s adjusted gross income, effectively excluding much of the deduction. The deductions must also be claimed as miscellaneous deductions on Schedule A of Form 1040, further limiting their use, because many members do not have sufficient itemized deductions to exceed the standard deduction (meaning that it would cost more to claim them than not). If those hurdles are overcome, however, there are many items that can be claimed.
Step one is to determine the types of items that would qualify, and then use Form 2106, Unreimbursed Business Expenses, to start the process. That form, like many others, can be obtained at IRS Centers, post offices and libraries, or from the IRS Web site (in a format that allows fill-ins on the Internet). Generally, deductions may be taken for expenses paid in the course of a trade or business, if they are ordinary and necessary, but are not reimbursed by the employer. The IRS has already ruled that employment by the armed forces is a “trade or business.” The most common types of expenses are travel, meals, lodging, uniforms, dues, education and publications.
The cost of travel from home to the drill location, is not deductible if the drill location is less than fifty miles away. If more than fifty miles, then travel costs, round trip, are deductible. The travel costs may not be deducted, however, if the government furnishes free transportation. The costs may be for commercial transportation, such as airfare, train tickets or bus fare. If the service member uses a privately owned vehicle, he or she has two choices: the actual costs of gas, oil, tolls, and a portion of depreciation are allowed to be written off; or the miles driven can be multiplied by 36.5 cents, and that amount taken as a deduction. If the service member drives from a civilian employer’s location to the drill site, or from the regular drill site to a temporary location, those miles also can be written off.
In addition to the cost of “getting there,” the full cost of hotel expense is deductible, if housing is not furnished by the military service, nor reimbursed. Meals that are not furnished nor reimbursed may only be deducted at 50 percent of their cost. As an option, the maximum federal per diem rate for the locality may be used as the base for deduction for meals, rather than the actual cost.
The service member is also entitled to deduct the expense of maintenance, repair, or alteration of uniforms; the costs of braid, insignia and medals; and other items required for uniform wear, if the items are not reimbursed or to the extent they exceed clothing allowances. If local military rules prohibit wearing certain types of uniforms off-duty, the cost of the uniform is also deductible, except to the extent of clothing allowances.
Dues for professional associations related to membership in the Reserve are deductible. These include, of course, ROA dues, as well as NRA, AFA, MOAA, VFW, and the like. Similarly, the costs of publications, such as magazines or books, technical references, language courses, and other items that enhance the service member’s military-connected abilities, education or potential for service, are deductible. And, as an “employee” of the armed forces, the cost of education that is either required by law or regulation, or by the employer to retain salary, status or the job; or which maintains or improves job-required skills within the Reserve forces or not, is deductible.
To summarize: The service member generally can deduct the costs of travel, meals, lodging, dues and publications, uniforms, and education. However, these must be non-reimbursed expenses for items not furnished by the government, and are deductible only to the extent they exceed 2 percent of adjusted gross income. They must be reported on Form 2106 and Schedule A of Form 1040. Forms 1040EZ or 1040A cannot be used. As a practical matter, the costs must exceed the standard deduction of $4,700 for a single person if other itemized deductions are not available.
Although these items are subject to the 2 percent threshold amount, there are other deductions available to military members not subject to that rule. Contributions to organizations qualified under Code section 501(c)(19), such as ROA and 501(c)(3), such as the Defense Education Forum, are deductible as charitable contributions.
More importantly, officers, official delegates, and committee members of ROA and similar organizations are entitled to deduct non-reimbursed expenses for travel, lodging, meals (50 percent limitation), supplies, telephone and long distance, and postage, as charitable contributions, whether for chapter, department or national meetings. Mileage is deducted at the rate of 14 cents, or actual expenses. Tolls and parking expenses are in addition to the mileage deduction.
Finally, a few miscellaneous notes: Reservists on active duty in a hazardous duty pay area are entitled to all the exclusions active-component members are entitled to receive. Reservists on active duty overseas at the regular tax time are entitled to use the June 15 filing date that is applicable to other active-component members. And, if your combined regular occupation pay and Reserve pay exceed $84,500 ($87,000 for 2003), you may claim a credit for excess FICA tax paid. Of course, all the deductions and credits allowed to the general civilian taxpayer apply to the service member as well.
Remember, the tax code and regulations are lengthy, but they are not beyond your comprehension. If you have specific questions, consult your tax preparer.
Colonel Benshoof serves as a national executive committeeman–Army, and has served two terms as national judge advocate. He holds a law degree from De Paul University, and a Master of Laws in Taxation degree from the same school. For more than 31 years of practice he has concentrated on a variety of taxation matters, and he is currently employed as a senior tax consultant with International Tax Advisors, Inc., of Buffalo Grove, Ill.
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