Publication 3 Armed Forces' Tax Guide

What Is the Publication 3 Armed Forces' Tax Guide?

Internal Revenue Service Publication 3 Armed Forces’ Tax Guide, or IRS Publication 3, is a document published by the IRS that outlines special tax considerations for active members of the United States military. It is one of a series of publications explaining the IRS rules for taxpayers with special situations.

Understanding the Publication 3 Armed Forces' Tax Guide

IRS Publication 3 covers both regular and reserve personnel directed by the Secretaries of Defenses, Army, Navy and Air Force, as well as the Coast Guard. Neither the Red Cross nor Merchant Marines are included. 

The tax guide details how and when active military members should file their tax returns and covers a number of topics that pertain specifically to service in the armed forces.

Allowances for Military Only

Members of the military receive several types of allowances and pay, such as Combat Zone Exclusions, which are not treated as normal income. The Armed Forces’ Tax Guide outlines which items are subject to taxation.

Taxable income listed in the guide includes basic pay for active duty, reserve training, training duty, and drills, among other assignments. It also includes special pay, such as foreign duty or medical and dental officers, in addition to bonus pay, incentive pay, and "other" pay, which includes student loan repayment from certain programs, high deployment per diem, and accrued leave.

Income that may be excluded from gross income includes combat pay and family allowances, which includes certain educational expenses for children and emergencies, moving allowances, travel allowances, and death allowances.

The Armed Forces’ Tax Guide also covers tax credits that are available to the general public, such as the child tax credit and earned income credit.

For the 2021 tax year, the Child Tax Credit has been raised to $3,000 for children ages six through 17 and $3,600 for children under six. This change is part of the American Relief Act. The credit will be paid monthly, not at tax time, and is a full refund, not partial depending on income. The credit is phased out for singles with incomes above $75,000 and couples with incomes above $150,000.

Tax Deductions Covered in IRS Publication 3

The guide clarifies questions members of the armed forces may have about business expenses and when they can claim a tax deduction.

For example, a section titled, "How To Report My Reserve-Related Travel Expenses" helps service members understand whether they are eligible to claim business expenses for meals when they are living abroad for their assignment.

The guide further outlines what kinds of expenses military workers can claim for the cost of their travel, transportation, uniforms, and educational activities.

IRS Publication 3 on Filing Instructions

The Armed Forces’ Tax Guide covers the logistical details of filing and explains how and when military workers can file their tax returns in a variety of situations, such as if they are overseas or in a combat zone when tax returns are due. This guide also provides military service members with information about tax-filing extensions, including who is eligible for an extension, how long an extension lasts, and how to get one.

Publication 3 does not cover benefits extended to veterans or military pensions. Those are covered in IRS Publication 525.