As 2011 tax deadline reaches, April 18, here are very good tax advantages for military families if they haven’t filed yet.

As Service members and their families have a few tax advantages at their disposal, as well as a few extra days in which to complete their taxes this year, a Defense Department tax expert said.

Army Lt. Col. Evan Stone, director of the Armed Forces Tax Council pointed out several new and existing tax laws military members and their spouses should keep in mind as the deadline draws near. at American Forces Press Service.

Here are the summary of the tax advantages for military families

2011 Tax Advantages for Military Families

2011 Tax Advantages for Military Families

Federal Tax Advantages for Military Families

  1. The government reduced the Social Security tax from 6.2 percent of wages to 4.2 percent solely for the 2011 tax year. “For example, a specialist with over two years of service would probably see about a $40 increase per month in his pay,” But while take-home pay is on the rise, tax brackets won’t change. Congress extended the 2010 tax brackets through 2011 and 2012.
  2. Other tax laws specific to military members and their spouses: The Combat Zone Tax Exclusion – Under this exclusion, for any day a member spends in a combat zone, that entire month’s worth of base pay is excluded from gross income for income tax purposes. There’s no limit to this exclusion for enlisted members and warrant officers; however, officers are limited to $7,714.80.  “Anything above that would be included in the member’s gross income,”
  3. Deployed service members and their spouses also have at least a 180-day extension to file or pay taxes from the date they leave the combat zone. To invoke this extension, people should write “combat zone” across the top of their return.
  4. Service members on duty outside of the United States also are entitled to an automatic two-month extension, pushing the deadline to June 18. However, unlike with the Combat Zone Tax Exclusion, while they gain an extension to file and pay taxes, the interest on any taxes owed still will accrue from April 18 until taxes are paid.
  5. A significant tax break involves military allowances – Under competitive compensation, housing and food allowances are nontaxable for income tax purposes, reducing taxable income at the end of the year and creating a savings of about $2,000 to $7,000, depending on salary.

State Tax Advantages for Military Families

  1. The Service Members’ Civil Relief Act has long granted service members the ability to retain their state of domicile for state tax purposes rather than the state where they are stationed. For example, a service member may be stationed in Virginia, but owns a home, pays property taxes and votes in Ohio. That member is entitled to claim Ohio as the state of domicile and not file state income taxes for military wages in Virginia.
  2. The government amended this same law in 2009 through the Military Spouses Residency Relief Act. In the past, a military spouse who moved to a new state and established a new residence there typically would claim that state as the state of domicile and pay state income taxes there, Stone explained. Now, spouses who move to a new state, reside there solely to live with their service member and are there pursuant to military orders won’t gain or lose a state of domicile for state income tax purposes. Some states, he added, also may require the spouse to have the same domicile as the service member to be eligible.  However, the law is complicated and each state may apply different guidance on the application of the relief act.

To help with this tax law and others, service members and their spouses have a host of free, expert tax-preparation services at their disposal from on-base centers to online software.