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Publication 3

Armed Forces' Tax Guide


What's New(p2)

Future developments.(p2)
The IRS has created a page on for information about Publication 3, at Information about any future developments affecting Publication 3 (such as legislation after we release it) will be posted on that page.
Due date for tax returns.(p2)
File your return by April 17, 2012. The due date is April 17, instead of April 15, because of the Emancipation Day holiday in the District of Columbia.
Earned income credit.(p2)
The maximum income you can earn and still claim the earned income credit has increased. You may be able to take the earned income credit if you earned less than $43,998 ($49,078 for married filing jointly) if you have three or more qualifying children; $40,964 ($46,044 for married filing jointly) if you have two qualifying children; $36,052 ($41,132 for married filing jointly) if you have one qualifying child; and $13,660 ($18,740 for married filing jointly) if you do not have any qualifying children. See Earned Income Credit, later, under Credits.
Standard mileage rate.(p2)
The standard mileage rate for the cost of operating your car for business use in 2011 is 51 cents a mile (55.5 cents a mile after June 30, 2011). The standard mileage rate for operating your car during 2011 to get medical care or to move is 19 cents a mile (23.5 cents a mile after June 30, 2011).
First-time homebuyer credit.(p2)
The provisions of the first-time homebuyer credit have expired for most taxpayers.
However, certain members of the uniformed services and Foreign Service and certain employees of the intelligence community may be able to claim the credit for homes purchased in 2011. See First-Time Homebuyer Credit, later, under Credits.


Change of address.(p2)
If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. Mail it to the Internal Revenue Service Center for your old address. (Addresses for the Service Centers are on the back of the form.) Use Form 8822-B, Change of Address—Business, if you are changing a business address.
Third party designee.(p2)
You can check the "Yes" box in the Third Party Designee area of your return to authorize the IRS to discuss your return with your preparer, a friend, a family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your tax return. It also allows your designee to perform certain actions. See your income tax instructions for details.
Photographs of missing children.(p2)
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.


This publication covers the special tax situations of active members of the U.S. Armed Forces. It does not cover military pensions or veterans' benefits or give the basic tax rules that apply to all taxpayers. For information on military pensions or veterans' benefits, see Publication 525, Taxable and Nontaxable Income. If you need the basic tax rules or information on another subject not covered here, you can check our other free publications. See Publication 910, IRS Guide to Free Tax Services, for a list and descriptions of the different tax publications.
For federal tax purposes, the U.S. Armed Forces includes commissioned officers, warrant officers, and enlisted personnel in all regular and reserve units under control of the Secretaries of the Defense, Army, Navy, and Air Force. The U.S. Armed Forces also includes the Coast Guard. It does not include the U.S. Merchant Marine or the American Red Cross.
Members serving in an area designated or treated as a combat zone are granted special tax benefits. In the event an area ceases to be a combat zone, the IRS will do its best to notify you. Many of the relief provisions will end at that time.

Comments and suggestions.(p2)

We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:

Internal Revenue Service
Individual Forms and Publications Branch
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at Please put "Publications Comment" on the subject line. You can also send us comments from Select "Comment on Tax Forms and Publications" under "Information about."
Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
Ordering forms and publications.(p3)
Visit to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.

Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613

Tax questions.(p3)
If you have a tax question, check the information available on or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.


Useful items

You may want to see:

 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad
 463 Travel, Entertainment, Gift, and Car Expenses
 501 Exemptions, Standard Deduction, and Filing Information
 503 Child and Dependent Care Expenses
 505 Tax Withholding and Estimated Tax
 516 U.S. Government Civilian Employees Stationed Abroad
 519 U.S. Tax Guide for Aliens
 521 Moving Expenses
 523 Selling Your Home
 525 Taxable and Nontaxable Income
 527 Residential Rental Property
 529 Miscellaneous Deductions
 559 Survivors, Executors, and Administrators
 590 Individual Retirement Arrangements (IRAs)
 596 Earned Income Credit (EIC)
 970 Tax Benefits for Education
 3920 Tax Relief for Victims of Terrorist Attacks
Form (and Instructions)
 1040X: Amended U.S. Individual Income Tax Return
 1310: Statement of Person Claiming Refund Due a Deceased Taxpayer
 2848: Power of Attorney and Declaration of Representative
 3903: Moving Expenses
 4868: Application for Automatic Extension of Time To File U.S. Individual Income Tax Return
 8822: Change of Address
 8822-B: Change of Address—Business
 9465: Installment Agreement Request
 9465-FS: Installment Agreement Request
See How To Get Tax Help, near the end of this publication, for information about getting IRS publications and forms.

Gross Income(p3)

Members of the Armed Forces receive many different types of pay and allowances. Some are included in gross income while others are excluded from gross income. Included items ( Table 1) are subject to tax and must be reported on your tax return. Excluded items ( Table 2) are not subject to tax, but may have to be shown on your tax return.
For information on the exclusion of pay for service in a combat zone and other tax benefits for combat zone participants, see Combat Zone Exclusion and Extension of Deadlines, later.

Table 1. Included Items

These items are included in gross income, unless the pay is for service in a combat zone.

Basic pay• Active duty Bonus pay• Career status
 • Attendance at a designated service school  • Enlistment
 • Back wages  • Officer
 • CONUS COLA  • Overseas extension
 • Drills   • Reenlistment
 • Reserve training   
 • Training duty  Other pay• Accrued leave
    • High deployment per diem
Special • Aviation career incentives   • Personal money allowances paid to
pay• Career sea   high-ranking officers
 • Diving duty   • Student loan repayment from programs
 • Foreign duty (outside the 48 contiguous   such as the Department of Defense
  states and the District of Columbia)    Educational Loan Repayment Program
 • Foreign language proficiency    when year's service (requirement) is not
 • Hardship duty   attributable to a combat zone
 • Hostile fire or imminent danger    
 • Medical and dental officers  Incentive pay• Submarine
 • Nuclear-qualified officers   • Flight
 • Optometry   • Hazardous duty
 • Pharmacy  • High altitude/Low altitude (HALO)
 • Special compensation for assistance with activities of daily living (SCAADL)    
 • Special duty assignment pay    
 • Veterinarian   
 • Voluntary Separation Incentive   

Basic allowance for housing (BAH).(p3)

You can still deduct mortgage interest and real estate taxes on your home if you pay these expenses with your BAH.

Death gratuity.(p3)

Any death gratuity paid to a survivor of a member of the Armed Forces is excluded from gross income.

Differential wage payments.(p3)

Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and that represent all or a portion of the wages the individual would have received from the employer if the individual was performing services for the employer. These amounts are taxable and cannot be excluded as combat pay.

Military base realignment and closure benefit.(p3)

Payments made under the Homeowners Assistance Program (HAP) generally are excluded from income. However, the excludable amount cannot be more than the maximum amount described in subsection (c) of 42 USC 3374 as in effect on November 6, 2009. Any part of the payment that is more than this limit is included in gross income. For more information about the HAP, see

Qualified reservist distribution (QRD).(p3)

A QRD is a distribution to an individual of all or part of the individual's balance in a cafeteria plan or health flexible spending arrangement if: A QRD is included in gross income and is subject to employment taxes. The employer must include the QRD (reduced by after-tax contributions to the health flexible spending arrangement) as wages on Form W-2, Wage and Tax Statement.

Thrift Savings Plan (TSP) distributions.(p4)

If you participate in the Uniformed Services TSP and receive a distribution from you account, the distribution is generally included in your taxable income.
If your contributions included tax-exempt combat zone pay, the part of the distribution attributable to those contributions is tax exempt. However, the earnings on the tax-exempt portion of the distribution are taxable. The TSP will provide a statement showing the taxable and non-taxable portions of the distribution.
You can get more information from the TSP website,, or the TSP Service Office.

State bonus payments.(p4)

Bonus payments made by a state (or a political subdivision thereof) to a member or former member of the uniformed services of the United States or to a dependent of such member are considered combat pay (and therefore may not be taxable) if the payments are made only because of the member's service in a combat zone. See Combat Zone, later, for a list of designated combat zones.
If you received nontaxable bonus payments in an earlier year and reported them as taxable income, you may be able to amend your return for that year to claim a refund of the tax you paid on the bonus payment. Use Form 1040X to claim the refund. Generally, you can file an amended return within 3 years after you filed your original return or 2 years from the time you paid the tax, whichever is later.

Foreign Source Income(p4)

If you are a U.S. citizen with income from sources outside the United States (foreign income), you must report all of that income (except for amounts that U.S. law allows you to exclude) on your tax return. This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or a Form 1099. This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties).
Certain taxpayers can exclude income earned in foreign countries. For 2011, this exclusion amount can be as much as $92,900. However, the foreign earned income exclusion does not apply to the wages and salaries of military and civilian employees of the U.S. Government. Employees of the U.S. Government include those who work at United States Armed Forces exchanges, commissioned and noncommissioned officers' messes, Armed Forces motion picture services, and similar personnel. Other foreign income earned by military personnel or their spouses may be eligible for the foreign earned income exclusion. For more information on the exclusion, see Publication 54.
Residents of American Samoa may be able to exclude income from American Samoa. This possession exclusion does not apply to wages and salaries of military and civilian employees of the U.S. Government. If you need information on the possession exclusion, see Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.
Military Spouses Residency Relief Act (MSRRA).(p5)
If you are the civilian spouse of an active duty U.S. military servicemember, you can choose to keep your prior residence or domicile for tax purposes when you accompany the servicemember spouse, who is relocating under military orders to a new duty station in one of the 50 states, the District of Columbia, or a U.S. possession. See Publication 570 for more information.

Table 2. Excluded Items

The exclusion for certain items applies whether the item is furnished in kind or is a reimbursement or allowance. There is no exclusion for the personal use of a government-provided vehicle.

Combat • Compensation for active service while  • Housing and cost-of-living allowances
zone pay  in a combat zone   abroad paid by the U.S.
  Note: Limited amount for officers   Government or by a foreign
Other pay• Defense counseling   • OHA (Overseas Housing Allowance)
 • Disability, including payments received    
  for injuries incurred as a direct result Moving • Dislocation
  of a terrorist or military action allowances• Military base realignment and
 • Group-term life insurance    closure benefit
 • Professional education    (the exclusion is limited as
 • ROTC educational and subsistence   described above)
   allowances   • Move-in housing
 • State bonus pay for service in a  • Moving household and
  combat zone   personal items
 • Survivor and retirement protection  • Moving trailers or mobile homes
  plan premiums  • Storage
 • Uniform allowances   • Temporary lodging and
 • Uniforms furnished to enlisted   temporary lodging expenses
   Travel • Annual round trip for dependent
Death • Burial services  allowances students
allowances• Death gratuity payments to  • Leave between consecutive
  eligible survivors    overseas tours
 • Travel of dependents to burial site   • Reassignment in a dependent
     restricted status
Family • Certain educational expenses for  • Transportation for you or your
allowances dependents    dependents during ship overhaul
 • Emergencies    or inactivation
 • Evacuation to a place of safety    • Per diem
 • Separation    
   In-kind military • Dependent-care assistance program
Living• BAH (Basic Allowance for Housing) benefits• Legal assistance
allowances• BAS (Basic Allowance for Subsistence)  • Medical/dental care
    • Commissary/exchange discounts
    • Space-available travel on
     government aircraft

Community Property(p5)

The pay you earn as a member of the Armed Forces may be subject to community property laws depending on your marital status, your domicile, and the nature of the payment. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Marital status.(p5)

Community property rules apply to married persons whose domicile during the tax year was in a community property state. The rules may affect your tax liability if you file separate returns or are divorced during the year.


Your domicile is the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. It is not always where you presently live.

Nature of the payment.(p6)

Active duty military pay is subject to community property laws. Armed Forces retired or retainer pay may be subject to community property laws.
For more information on community property laws, see Publication 555, Community Property.

Form W-2 Codes(p6)

Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year.
Form W-2 also shows other amounts that you may find important in box 12. The amounts shown in box 12 are generally preceded by a code. A list of codes used in box 12 is shown below.

Form W-2 Reference Guide for Box 12 Codes

AUncollected social security or RRTAJNontaxable sick payTAdoption benefits
 tax on tips    
  K20% excise tax on excess goldenVIncome from exercise of
BUncollected Medicare tax on tips parachute payments nonstatutory stock option(s)
CTaxable cost of group-term lifeLSubstantiated employee businessWEmployer contributions (including
 insurance over $50,000 expense reimbursements employee contributions through a
     cafeteria plan) to an employee's
DElective deferrals under a sectionMUncollected social security or RRTA health savings account (HSA)
 401(k) cash or deferred arrangement tax on taxable cost of group-term life  
 plan (including a SIMPLE 401(k) insurance over $50,000 (formerYDeferrals under a section 409A
 arrangement) employees only) nonqualified deferred
     compensation plan
EElective deferrals under a sectionNUncollected Medicare tax on taxable  
 403(b) salary reduction agreement cost of group-term life insuranceZIncome under section 409A on a
   over $50,000 (former employees only) nonqualified deferred
FElective deferrals under a section   compensation plan
 408(k)(6) salary reduction SEPPExcludable moving expense  
   reimbursements paid directly toAADesignated Roth contributions
GElective deferrals and employer employee under a section 401(k) plan
 contributions (including nonelective    
 deferrals) to a section 457(b)QNontaxable combat payBBDesignated Roth contributions
 deferred compensation plan   under a section 403(b) plan
  REmployer contributions to an Archer  
HElective deferrals to a section MSADDCost of employer-sponsored
 501(c)(18)(D) tax-exempt   health coverage
 organization planSEmployee salary reduction contributions under a section 408(p) SIMPLE

Designated Roth contributions under a governmental section 457(b) plan

Note. For more information on these codes, see your Form(s) W-2.