Military Certification

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 3 - Armed Forces Tax Guide

• 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

1. 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.

2. 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 

3. 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

4. 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

4. • 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. 

State Exercise Training

Military Tax Handbook