Active Duty Tax Breaks: Moves, Combat Pay, and Where to File for Free

By SSgt Christian Horton

Page updated: October 21, 2026 · Sources checked: October 21, 2026

Reviewed October 21, 2026, tax year 2026 filing season (returns for tax year 2025).

The things active duty service members ask about most at tax time. Each section names its official source and links to it. We list only what an official page confirms.

Federal figures come from the 2025 edition of IRS Publication 3, Armed Forces’ Tax Guide, the version current when we checked. Rules and dollar limits change each year, so check the current publication before you file.

Moving because of a PCS: the moving expense deduction

The deduction is limited to the military: Publication 3 says you must be a member of the Armed Forces on active duty and your move must be due to a military order and the result of a permanent change of station.

IRS Publication 3 says: “If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.” A member of your household is anyone who has both your former home and your new home as their main home. It does not include a tenant or employee unless you can claim that person as a dependent.

• Household goods and personal effects: hauling a trailer, packing, crating, in-transit storage and insurance. You cannot deduct the cost of moving furniture or other goods you bought on the way from the old home to the new one.
• Storage and insurance: only the cost within any period of 30 consecutive days after the day the goods are moved from your former home and before they are delivered to your new home.
• Travel: lodging within certain limits, but not meals, from the old home to the new home, including car expenses and airfare. For a car you can use actual out-of-pocket costs such as gas and oil, or the standard mileage rate.
• Only what was not reimbursed or furnished in kind. Form 3903 figures the deduction for qualified expenses that exceed your reimbursements and allowances, including excluded dislocation allowances, temporary lodging expenses and allowances, and move-in housing allowances.
• Reporting: use a separate Form 3903 for each move, and carry the deduction from Form 3903, line 5, to Schedule 1 (Form 1040), line 14.

The IRS mileage table also lists a military moving rate: 20.5 cents per mile for January 1 through June 30, 2026 and 23.5 cents from July 1, 2026. See our military finance news page for the notice behind each figure.

Source: IRS Publication 3, Armed Forces’ Tax Guide (2025), Moving Expenses; IRS: About Form 3903, Moving Expenses.

Combat-zone pay exclusion

IRS Publication 3 says that if you are an enlisted member, warrant officer or commissioned warrant officer, none of your combat zone pay is included in your income. For other commissioned officers the exclusion is capped each month at the highest rate of enlisted pay plus any imminent danger or hostile fire pay received; for 2025 the cap is $10,983 per month.

• Serving in a combat zone for any part of a month earns the exclusion for the whole month.
• The pay can be received after you leave the zone, or in a later year, if the month was one you served there or were hospitalized from wounds, disease or injury incurred there.
• Your Form W-2 should already reflect the exclusion: box 1 should not include excluded pay. The excluded amount appears in box 12 with code Q.
• Retirement pay and pensions do not qualify for the exclusion.

Publication 3 names Afghanistan, Kosovo and the Arabian Peninsula as designated combat zones, with combat zone tax benefits also given by Congress for the Sinai Peninsula of Egypt under certain circumstances.

State bonus payments

Publication 3 says a state bonus payment will be treated as combat zone pay and may not be taxable if it is made because of your current or former service in a combat zone. A state bonus payment is a bonus payment made to you or to your dependents by a state or a political subdivision of a state.

Source: IRS Publication 3, Armed Forces’ Tax Guide (2025), Combat Zone Exclusion. Our guide for reservists: combat zone exclusion for reservists.

Combat pay and the Earned Income Tax Credit

Nontaxable military pay, such as the Basic Allowance for Housing (BAH) and the Basic Allowance for Subsistence (BAS), is not earned income for the EITC. Nontaxable combat pay is the exception: you can elect to include it in earned income.

• The election is all or nothing: you must include all of your nontaxable combat pay if you elect.
• On a joint return, you and your spouse each make your own election.
• The amount is in box 12 of your Form W-2 with code Q. Beginning in 2024, nontaxable combat pay is reported on Form 1040 or 1040-SR, line 1i.
• It may increase or decrease your credit. Figure the credit with and without the combat pay before you decide. For 2025, IRS Publication 3 says you may benefit if your earned income without it is under $8,490 with no qualifying children, $12,730 with one, or $17,880 with two or more.

Source: IRS Publication 3, Armed Forces’ Tax Guide (2025), Earned Income Credit; IRS Publication 596, Earned Income Credit (2025); IRS: special EITC rules for military.

Roth TSP contributions

Publication 3 says Roth TSP contributions are included in your income. They are after-tax contributions and are subject to the same contribution limits as the traditional TSP. Qualified distributions from your Roth account in the TSP are not included in your income. For more detail, Publication 3 points to Part II of IRS Publication 721 and the TSP booklet. Our news page tracks the current TSP limits.

Source: IRS Publication 3, Armed Forces’ Tax Guide (2025), Uniformed Services Roth TSP.

MilTax free filing

Military OneSource says MilTax is a free tax service made for the military. Both the tax software and expert consultations are free for active-duty service members, eligible family members, survivors and recent veterans up to 365 days from their separation or retirement date. Eligibility is verified through the Defense Enrollment Eligibility Reporting System (DEERS). Consultants can help with topics such as the Military Spouses Residency Relief Act, moving deductions and combat pay exclusions. The IRS military page also describes MilTax as a Department of Defense program that generally offers free tax return preparation and e-filing software for all military members, with no income limit, including federal returns and up to five state returns.

When we checked, the Military OneSource page said the MilTax software “will be available in January 2027.” Use the page for the current status and phone number.

Source: Military OneSource, MilTax: Free Software & Support; IRS: Military.

TSP and combat zone pay

IRS Publication 3 says that if your contributions to the Thrift Savings Plan included tax-exempt combat zone pay, the part of a distribution attributable to those contributions is tax exempt, but the earnings on that tax-exempt portion are taxable. Pub 3 also notes that for 2025, combat zone service lets a service member contribute as much as $70,000 to a TSP retirement account (the annual additions limit, which excludes catch-up contributions). Tax-exempt contributions above the regular elective deferral limit go into the traditional portion of your account. Check the current-year limits in IRS Publication 590-A or the TSP booklet before you set your election.

Source: IRS Publication 3, Armed Forces’ Tax Guide (2025), Uniformed Services Traditional TSP and Roth TSP.

State residency: MSRRA and the Veterans Benefits and Transition Act

Military OneSource says the Military Spouses Residency Relief Act (MSRRA) “allows military spouses to declare the same state of legal residency as their spouse,” and the Veterans Benefits and Transition Act (VBTA) “allows spouses to choose their service member’s state of legal residence even if they have not lived in that state.” Military OneSource lists three choices for state income tax residency: the service member’s residence or domicile, the spouse’s residence or domicile, or the service member’s permanent duty station. IRS Publication 3 likewise says a civilian spouse can elect to have the same domicile or residence as the servicemember and points to Pub. 570 for details.

• The protection covers the active-duty service member’s military income. Military OneSource says other income, including rental property income, is taxable by the state where it is earned.
• Ask your spouse’s employer about state withholding forms, and confirm the rules with your state tax agency or an installation legal assistance office.

Source: Military OneSource, Military Spouses Residency Relief Act (page dated Oct. 23, 2025); IRS Publication 3 (2025), Domicile.

Servicemembers Civil Relief Act (SCRA)

Military OneSource describes several SCRA protections. The IRS and state and local tax authorities “must defer your income taxes due before or during your military service” if service materially affects your ability to pay, with no interest or penalty added for the deferral. Your tax residency and voting residency are unaffected by being away on military service. Creditors must reduce the interest rate to 6% on debts you took on before entering active duty, and you may terminate a residential lease with written notice and a copy of your orders. Ask your installation legal office how the rules apply to you.

Source: Military OneSource, SCRA (page dated Jan. 2, 2025).

Short answers

Sources

• IRS Publication 3, Armed Forces’ Tax Guide (2025)
• IRS: About Form 3903, Moving Expenses
• IRS Publication 596, Earned Income Credit (2025)
• IRS: special EITC rules for military
• Military OneSource, MilTax: Free Software & Support
• IRS: Military
• Military OneSource, Military Spouses Residency Relief Act
• Military OneSource, SCRA

All sources were read on October 21, 2026. See also our sources and editorial policy.

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