Reservists in the military play an extremely important role, but it can sometimes be more difficult to find information about the benefits and special programs that are especially for them. Reservists definitely deserve to be fully informed about these measures.
One such benefit is a special tax deduction available to all members of a reserve component of the Armed Forces of the United States. This deduction is designed to help reserve members offset the sometimes-significant costs that come along with travel associated with reserve membership, including mileage, food, lodging, and more.
This reservist travel expense deduction is what is called a “top line” deduction, meaning that there are no hurdles to clear—it can be taken even by those who do not itemize deductions, and costs do not have to add up to a certain amount in order to be deducted. (Normally, business expenses have to add up to more than 2% of AGI in order to be deductible, a bar that is hard to clear for many.) Instead, the costs are an adjustment to income—they actually reduce a reservist’s adjusted gross income on his or her taxes.
What Are the Rules?
First of all, in order for travel expenses be deductible, they must have been incurred on a trip that was solely taken to perform service-related duties. The reservist also needs to have traveled more than 100 miles away from his or her home. And as is probably obvious, the reservist cannot deduct expenses for which he or she has already been reimbursed by the military.
Expenses that can be deducted include all work-related travel and lodging, as well as 50% of the costs of travel-related food. This would include hotel stays, transportation (so, plane, train, and bus tickets, car rentals, etc.), mileage on a personal vehicle (at the standard federal mileage rate), tolls, and parking fees. Keep in mind that you cannot deduct the full cost of the Hotel Grand Ritz here—you are limited to deducting the federal government per diem rate for lodging in the area.
It’s important to keep records just in case you get audited, so retain receipts of expenses. For meals, it is easier and acceptable to use 50% of the per diem rate, which can be found here.
The mileage deduction is the one that is likely to be most valuable to be many reservists. For instance, a reservist who drives 120 miles each way to drill 10 times per year could claim an adjustment to income of $1296, which is significant.
Altogether, this little-used deduction can save reservists some real money. It is even possible to amend past years’ tax returns if this deduction was owed to a reservist but not taken.
For help with this often-overlooked deduction, visit the links below. It may be particularly useful to speak with the experts at MilTax.
Internal Revenue Service. (2016). Publication 3 (2016), Armed Forces’ Tax Guide. Retrieved from https://www.irs.gov/publications/p3#en_US_2016_publink100049678
Lear, J. (n.d.) The secret National Guard and Reserve tax break you might not know. Retrieved from http://www.military.com/money/personal-finance/taxes/secret-national-guard-and-reserve-tax-break-you-might-not-know.html
Steber, M. (n.d.) Tax considerations for reservists. Retrieved from http://www.military.com/money/personal-finance/taxes/tax-considerations-for-reservists.html