Tax Breaks, Benefits Available to Military Families

As we prepare to honor our armed forces this Veterans Day, let's also acknowledge the very real financial challenges they and their families often face, both while serving their country and after being discharged. Fortunately, service members needn't go it alone: Many tax benefits, social services and financial assistance programs are available to help.

Special tax benefits for active duty armed forces include:

• If you move because of a permanent change of station, you may be able to deduct reasonable un-reimbursed moving expenses from your taxes.
• If you serve in a combat zone for any part of a month, any military pay you received during that month is not considered taxable income.
• You can also include nontaxable combat pay as "earned income" when claiming the Earned Income Tax Credit for low- to moderate-income earners.
• Deadlines for filing tax returns, paying taxes, filing refund claims and taking other actions with the IRS are automatically extended for qualifying military members.
• Joint tax returns generally must be signed by both spouses. But, when one spouse is unavailable due to military duty, you may use a power of attorney to file a joint return.
• If you're an armed forces reserves member, you can deduct un-reimbursed travel expenses for travel more than 100 miles from home to perform reserve duties.
• As you transition to civilian life, you may be able to deduct certain costs incurred while looking for a new job, including travel, resume preparation and outplacement agency fees, and moving expenses, if your move is closely related to the start of work at a new job location and you meet certain tests.
• Most military installations offer free tax filing and preparation assistance during and/or after tax filing season.
• The IRS's Armed Forces' Tax Guide provides an excellent summary of many important military-related tax topics.

Low pay scales, frequent relocation costs and other financial challenges sometimes cause military families to fall behind on bill payments or even be victimized by predatory lenders. Ultimately, these practices could jeopardize someone's security clearance or even trigger a discharge.

Here are a few suggestions and precautions for military families:

• Each base command offers free financial specialists to discuss personal finances and help with budgeting; many banks and credit unions also offer these services.
• Each military branch has a relief society and many grant emergency loans. Turn to them first before taking out a payday loan.
• Check-cashing outlets, pawn shops and other lenders are prohibited from charging more than 36 percent interest to military families for payday loans.
• If you do go off-base for financial assistance, you're responsible for disclosing your military status in order to receive military rates. The 36 percent maximum rate is still very high and could take years to pay off, so explore other borrowing options such as your bank or credit union first.
• Before signing loan documents, make sure it's for something you truly need and not just a "want." Then ensure you fully understand all loan terms (annual percentage rate, monthly payment amount, full payback amount, fees, penalties, etc.) Don't hesitate to take the paperwork home to think it over or consult with a financial adviser.
• Avoid pawn shop loans that use your car's title as collateral. Besides paying a very high rate, missing a payment could cost you ownership of your car.
• Set up an automatic paycheck withdrawal for an emergency fund; that way, you won't be tempted to take out a high-interest loan when unexpected expenses occur.
• When choosing a bank or credit union, ask what special benefits they extend to military families (free checking, financial counseling, etc.)

• The Consumer Financial Protection Bureau's Office of Servicemember Affairs, spearheaded by Holly Petraeus, features tools designed to help military families avoid poor lending decisions, capitalize on their Veteran's Administration benefits and plan their financial future.
• Military OneSource is a Department of Defense program that helps service members and families with such concerns as money management, spouse employment and education, parenting and childcare, relocation, deployment and more.
• Military.com's Money site features tax tips, relocation assistance, retirement information, credit guidelines and more.
• USA.gov features a robust site for military personnel and veterans with information on benefits and pay, family support, consumer resources and more.
• SaveAndInvest.org, a financial education program created by the Financial Industry Regulatory Authority's Investor Education Foundation to improve military members' saving and investing knowledge.
• The GI Bill provides a broad range of education benefits for military veterans.
• The Veterans' Employment and Training Service (VETS), provides an intensive three-day Transition Assistance Program to separating or retiring service members and spouses to ease reentry into the civilian workplace through job search and resume preparation assistance and providing information on employment, training and veterans' benefits.
• The Department of Veterans Affairs' Vocational Rehabilitation and Employment's VetSuccess Program helps veterans with service-connected disabilities find jobs.
• Organizations like Hire a Hero, Military Exits and Helmets to Hardhats bring military job seekers together with military-friendly employers.

Other benefits available to service members and veterans include:

• The government provides Servicemembers' Group Life Insurance to all military personnel for only 65 cents per $1,000 of insurance per month, up to a maximum of $400,000 in coverage.
• Inexpensive supplemental life insurance to cover spouses and/or dependent children is also available.
• Dependency and Indemnity Compensation, a monthly benefit paid to eligible survivors of certain deceased veterans.

It's vital that our military men and women fully understand the benefits available to them -- as well as the financial pitfalls they may be vulnerable to when rushing off to serve their country.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial adviser for specific information on how certain laws apply to you and about your individual financial situation.