Taking the Military Certification Test
15 Questions – 80% passing – be careful when taking the first time
Several test scenarios are not experienced frequently in reality
Test training sources:
IRS Pub 4491 VITA/TCE Training Guide - contains four lessons that pertain specifically to the military certification:
Lesson 12 - Schedules K-1 and Rental
Lesson 16 - Military Income
Lesson 18 - Military Adjustments to Income
Lesson 32 - Military Finishing and Filing the Return
Guide for taking the Military Certification Test
Four Unique Military Tax Situations
Combat Pay – Reported in W-2, Block 12a, Code Q
Combat pay is excluded from taxable wages. It includes several pay categories - base pay, hostile fire pay, reenlistment bonus, accrued leave, and several other pay and allowances.
W-2 Block 12a entry made in TaxSlayer–Similar to codes D and DD no other actions required
Nontaxable Combat pay can be used to increase earned income credit – TaxSlayer calculates.
Form 2106 Employee Business Expenses - Reservist Travel
Reservist Travel must be greater than 100 miles (one way) from home (e.g. for monthly drills)
Client should have detailed records
Financial profit from travel is included as additional wages on Form 1040. Financial loss is reported on 1040 Schedule 1 as an Adjustment to income.
Information on Government Reimbursement is reported on W-2, Block 12, Code L
Reimbursement is 70 cents per mile for travel to/from duty station for 2025.
Reasonable lodging, meals (50%) and incidental expenses (per diem) are reimbursable
Incidental expenses (tips) can be deducted, but not uniform purchase and upkeep
Form 3903 - Moving Expenses (Household Goods and Personal Effects and Travel)
Normally the military arranges, manages, and pays for all moving expenses associated with a base/post transfer, called a Permanent Change of Station (PCS) – This tax situation only applies to a do-it-yourself move, also called a Personally Procured Move.
Client should have detailed records
Financial Profit from the move is included as additional wages on Form 1040. Financial loss is reported on 1040 Schedule 1 as an Adjustment to income.
Information on Government Reimbursement is reported on W-2, Block 12, Code P
Auto reimbursement is 21 cents a mile for 2025, plus parking and tolls via shortest, most direct route
Spouse/dependent move from separate location is not deductible
Side trips, stopovers, and pre-move house hunting trip costs are not deductible
Cost of shipping car and household pets are deductible
Packing/crating supplies, truck rental, parking in-transit, 30 days storage, and insurance costs are deductible
Meal cost is not deductible; Lodging (per diem) for authorized travel days is deductible
Residential Rental of Home- Schedule E – Supplemental Income and Losses
Simple rentals only, complicated rentals are out of scope
Rentals are only for the personal residence of active-duty military, not civilian personnel which are out of scope
Additional rental income is reported on 1040 Schedule 1.
Rental losses are in scope and common due to depreciation expense.
Income and Expenses are very similar to Schedule C Business Income
Rental expenses include mortgage interest, property taxes, insurance, management fees, depreciation expense, supplies and repair costs, but not value of owner’s labor
Depreciation expense is calculated by the taxpayer and consistent with prior year returns – all depreciation forms (Form 8582, 4562, 6198) are out of scope.
Commercial Business rentals are out of scope – no Qualified Business Income deduction
There are other out of scope Items consistent with Tax Aide restrictions
Other Military Tax Related Items
Veterans Administration Disability Payments have no tax consequences – no tax forms are issued, there are no Federal or State tax liabilities
Combat zone or contingency operation filing deadline extensions – are permitted for 180 days after the last day in a combat zone/contingency operation, plus days left available in tax filing period (e.g. 3 1/2 months -Jan 1- April 15) if combat zone/contingency operation duty began before or during the tax filing period.
This handbook contains all the info tax counselors need to know to prepare returns for military service members.