I have been pretty quiet for a couple of weeks enjoying the holidays with my family and I hope you have all been able to do the same. Now that most of the hectic days are over, it is time to start thinking of the things we all have to do to tidy up and complete 2011, one of which is gathering your tax info.  This post is going to describe one of the key linkages between travel and taxes for the military, namely how military Reservists can deduct most of their travels even while earning all those miles.

The tax deduction for military Reservists is one of the IRS’ top ten deductions most commonly not taken.  It is a pretty generous benefit that was significantly expanded after 9/11.  To sum it up, it says “If you travel overnight more than 100 miles away from your tax home to a meeting or training camp, you may claim an above-the-line deduction for transportation, lodging, and meals attributable to those trips.”

While this may not be very applicable to the E-2 who is assigned (by law) to a unit within 50 miles of his or her home, it is very common for both enlisted and officers to travel significantly due to a scarcity of higher level positions or to stay within their MOS or rating.  This travel can often be a great source of frequent flyer miles or hotel points and you might as well also make the most of it by taking the cost off of your taxes as well.  What makes the latest version of the law particularly attractive is the “above-the-line” part.  Normally, we can all deduct legitimate business-related expenses, but they mean nothing unless they exceed 2% of your AGI (adjusted gross income).  This is a tough limit to exceed and many active duty deductions such as uniforms, professional society dues, etc. don’t add up to enough to exceed this limit and thus gain you no benefit.

With the current law, a Reservist can deduct the full amount of their airfare, hotel, car rental, taxis, parking fees, tolls, and 50% of their meals, just like a normal business expense.  However, it is entered on Form 1040, line 24 and acutally reduces your AGI which can be beneficial in avoiding other tax deduction limitations.  As always, the IRS will trust whatever number you put down unless they decide to audit you, so keep records of all your expenses.  For meals, you can use the M&IE rate for the local per diem.  You can find that rate at this GSA link, http://www.gsa.gov/portal/category/21287.  Note that they changed their home page this year, so old link you may have won’t work.

DISCLAIMER:  As usual, consult your tax professional for all real tax advice.  The information expressed above is my understanding of the current law and cannot be used in any stupid letter rants you may write to the IRS.

Sorry that I can’t give a similar benefit to the active duty or federal employees out there, but on the other hand, I expect most of your travel is paid for by Uncle Sam, so be happy, since all the above costs for Reservists come out of their own pockets.

 

Posted by glenn | 2 Comments

2 responses to “Tax Information for Reservists”

  1. James says:

    Good day, I am an Air Force reservist and I currently work as an aircraft mechanic (Crew Chief). I work with many aircrew members who are reservists part time and are airline pilots in their full time civilian career. My question is, these pilots can write-off their loss in per diem while deployed, as a per diem deduction since, they only get $3.50 a day while deployed. As it was described to me, when deployed and getting $3.50 per day, the per diem rates are usually much higher and the difference between the two are used as a deduction on their taxes when they file a 2106 the following year. I don’t understand how or why they get to do this and us ground crews, deployed to the same locations, getting $3.50 a day, and can’t write off the difference. My last deployment was for 130 days, and was at a location where per diem was $114 per day. So the aircrews with us said they were able to write off the $110.50 per day difference on their 2106. Does this sound legit?

    • glenn says:

      @ James – I am certainly NOT a tax expert and you should consult one for a specific case, but this certainly does not sound allowable to me. Both times that I deployed to Iraq, I received the $3.50/ day, but that is because the Government was paying for my lodging and meals (and paying a lot!). The $3.50 is meant to cover incidentals such as toothpaste. Can’t see where they would have the basis to claim more unless they were in some situation where they had to pay for meals or lodging.

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