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Individuals who serve in the military generally pay the same federal tax rates as everyone else. However, there are a number of exceptions to the rules.Specific exclusions and deductions can decrease service members' tax bills substantially.
Combat Exclusions
When soldiers serve in a combat zone, active-duty pay is not taxed. Other exclusions include danger pay, and pay earned in the hospital if a service member is wounded or incapacitated due to combat.
Other Deductions
Among other--non-combat-related--benefits, military members may deduct moving expenses, uniform costs, certain business expenses and travel to and from Reserve meetings. As a good working resource, military.com walks soldiers through the whole process.
Free Stuff
While on active duty, three meals a day are free. On-post military housing is free, too, and medical and dental benefits are free for the active-duty soldier. There is no charge for medical care for soldiers' families, either. The value of these benefits is not counted as income.
Figuring Tax
It's a good idea for each soldier to obtain a copy of IRS Publication 3, Armed Forces Tax Guide. After reading the information, it's easy to figure out how much of his income will be taxed after exclusions and deductions. From there, the federal tax tables will tell each individual what he owes.
State Taxes
State taxes are another issue. Each has its own laws, and may or may not exempt all or part of military pay. Many states do exempt some military pay, but read the rules carefully before filing. As of 2009, nine states had no state income tax at all.
Source:
IRS: Info for Taxpayers Serving in the Armed Forces
IRS Publication 3: Armed Forces Tax Guide
Resource:
Military.com
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