It's Tax Time, any Guard/Reserve Tips?

[C-17->Majors]

I'm sitting down with my new copy of Turbo Tax trying to make sense of the new tax rules for commuting reservists (>100 miles). I thought this might be a good time for some of you experienced folks to share your tax deductions ideas with the rest of us, plus give an insight on how to use the new tax rules for guard/reserve commuters.

I'm not looking to go to jail, but I don't want to miss out on any deductions I may have coming to me (gym membership, haircuts, shoe shines, ANGUS dues?). Of course anything you post will not be construed as tax advise. If you can cite any tax rules that back up your deductions that would be very helpful come audit time.

Just thankful to be paying taxes this year!

JR

 

[Checks]

I have not updated my version of TaxCut yet so everything I write could be terribly wrong(but I doubt it).

-First of all, Tax Cut is a cheaper program that I find to be easier to use.
-Congress approved rules which allow an above line "credit" for reservists who commute more than 100miles. The limit on this "credit" is 1500 dollars.
-I have a log of mileage driven to guard duty. A round trip takes 224 miles. 224sm X the standard mileage of .36 =$80.64
With AFTPS I easily reached the 1500 dollar limit by only using mileage.
-You can also use lodging and meals to reach the 1500 dollar limit. I believe you need reciepts for the lodging but can use the per diem rate for meals.
-In addition to the above "credit" you can also take off other expenses if you itemize. If you use the standard deduction then dont worry about it. If you itemize then you should keep receipts of everything from shoe polish to drycleaning because these are legit expenses arising from your participation in the Guard.

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By Roy Lewis (TMF Taxes)
December 12, 2003


This past Veterans Day, President George Bush signed into law the Military Family Tax Relief Act of 2003. This new law provided a number of relief provisions for our fighting men and women. Many of you have friends and family in the military, so make sure that you pass this article along to them so they can be aware of the new tax breaks available to them.

Home sale tax exclusion
Since 1997, Americans have been able to exclude the gain from the sale of a principal residence as long as certain qualifications were met. One of those qualifications required that the homeowner lived in the residence for at least two of the five years immediately preceding the sale of the residence. While there are provisions to allow for a partial exclusion if the two-year requirement isn't met, and if the move is required for business or work-related reasons, that relief was not extended to military or foreign service personnel. But that oversight has been corrected with the new law.

Military and foreign service personnel may now make an election to suspend the running of the five-year holding period while the taxpayer or spouse is on a qualified official extended (i.e., more than 90 days) duty assignment. The holding period suspension can be for a maximum of 10 years. The election applies retroactively to 1997, and if a qualifying member was required to pay taxes because of the holding period rules, an amended return can be filed in order to recoup those taxes paid. This is true even if the prior return is beyond the statute of limitations. In other words, qualifying taxpayers who sold a residence before 2001 have until Nov. 10, 2004, to amend their returns for this purpose.

Taxability of death benefits
The death benefit (called death gratuity benefit) paid to the survivors of a member of the military killed in the line of service after Sept. 10, 2001, increased from $6,000 to $12,000. Under the new law, the entire amount of the benefit is not subject to tax (under the old law, only $3,000 of the $6,000 total benefit was tax-free). Again, note that this new provision is retroactive to 2001. That being the case, an amended return might be in order to exclude all of the death benefits received in prior years.

Combat zone filing rules
Generally, military personnel stationed in a combat zone receive an extended period of time for the filing and payment of federal income taxes. The new law also provides this extension to military personnel involved in contingency operations (e.g., Operation Iraqi Freedom or Operation Enduring Freedom) as designated by the secretary of Defense.

Military academy penalty waivers
The new law waives the normal 10% penalty for payments received from a Qualified Tuition Plan or Coverdell Education Account that are not used for qualified education expenses for attendees of the U.S. Military, Naval, Air Force, Coast Guard, or Merchant Marine Academies. The penalty waiver is effective for 2003 and subsequent years.

Reservists travel expenses
Members of the National Guard and other similar reserve units are often required to travel as part of their service obligation. These travel expenses can be significant, and often they are not completely reimbursed by the military. While these unreimbursed expenses could be claimed as a miscellaneous itemized deduction, they would only provide tax relief if the taxpayer itemized deductions. And even then, those expenses would have to pass the 2% of AGI test.

This is no longer the case. Effective Jan. 1, 2003, there is an "above the line" deduction for overnight travel costs incurred for travel that is more than 100 miles from the taxpayer's home, including meals, transportation, and lodging up to the amount allowable as per-diem allowances. This means that the taxpayer will no longer be forced to itemize deductions in order to receive a tax benefit from these business expenses.

Exclusion for amounts received under HAP

 

[C-17->Majors]

$1500 Limit??

OK, I came up with $3000 worth of commuting deductions, where is the $1500 limit listed. Can't find it in IRS pubs.

JR

 

[Checks]

Your right. There is no limit.

I have a question now-
Does my travel to Guard duty have to be overnight travel???

I dont think so but want to be sure before I file these taxes.

 

[C-17->Majors]

I didn't see anything about an overnight stay in the tax info. What a nice benefit deducting these expenses off your AGI. For once it pays to be a commuter.

 

[Checks]

An IRS guy told me that "travel" always means overnight travel, not same day. Whether thats true or not I have no idea. I might just take my chances with an audit