Publication 3: Armed Forces' Tax Guide; Introductory Material

This is archived information that pertains only to the 2004 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

What's New

Sales tax deduction. You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A. Generally, you can use either your actual expenses or the Optional State Sales Tax Tables to figure your state and local general sales tax deduction. See the Instructions for Schedule A for details.

Earned income credit. The definition of earned income and the amount of maximum income you can earn have changed.

You can now elect to have your nontaxable combat pay included in earned income for the earned income credit. For details, see Earned Income Credit, later.
The maximum amount of income you can earn and still claim the earned income credit has increased. You may be able to take the credit if you earned less than $34,458 ($35,458 for married filing jointly) if you have two or more qualifying children; $30,338 ($31,338 for married filing jointly) if you have one qualifying child; and, $11,490 ($12,490 for married filing jointly) if you do not have any qualifying children. See Earned Income Credit.

Standard mileage rate. The standard mileage rate for the cost of operating your car increased to 37.5 cents a mile for all business miles driven. The standard mileage rate for operating your car to get medical care or to move increased to 14 cents a mile.

Exemption amount. You are allowed a $3,100 deduction for each exemption to which you are entitled.

Reminders

Servicemembers Civil Relief Act. As a member of the Armed Forces, you may be able to defer (delay) payment of income tax that becomes due before or during your military service for up to 180 days after termination or release from service. For more information, see Not in a combat zone under Extension of Deadline.

Death Gratuity. The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001, is $12,000. The full amount is nontaxable. Prior to 2003, the death gratuity was $6,000 and only $3,000 of it was nontaxable. So, you may be able to claim a refund if you paid tax on a death gratuity you received because of a death that occurred after September 10, 2001.

Reserve component travel expenses. As a member of a reserve component of the Armed Forces, you can deduct travel expenses for any period during which you are more than 100 miles away from home in connection with your reserve duties. Enter the deduction on Form 1040, line 24, rather than as a miscellaneous itemized deduction on Schedule A (Form 1040). For more information, see Armed Forces Reservists under Adjustments to Income.

Third party designee. You can check the Yes box in the Third Party Designee area of your return to authorize the IRS to discuss your return with a friend, family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your tax return. It also allows your designee to perform certain actions. See your income tax package for details.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication covers the special tax situations of active members of the U.S. Armed Forces. It does not cover military pensions or veterans' benefits or give the basic tax rules that apply to all taxpayers. For information on military pensions or veterans' benefits, see Publication 525, Taxable and Nontaxable Income. If you need the basic tax rules or information on another subject not covered here, you can check our other free publications. See Publication 910, IRS Guide to Free Tax Services, for a list and descriptions of the different tax publications.

For federal tax purposes, the U.S. Armed Forces includes commissioned officers, warrant officers, and enlisted personnel in all regular and reserve units under control of the Secretaries of the Defense, Army, Navy, and Air Force. The U.S. Armed Forces also includes the Coast Guard. It does not include members of the U.S. Merchant Marine or the American Red Cross.

Members serving in an area designated or treated as a combat zone are granted special tax benefits. In the event an area ceases to be a combat zone (by Presidential Executive Order or by statute), the IRS will do its best to notify you. Many of the relief provisions will end at that time.

Members serving in a qualified hazardous duty area designated by statute are afforded the same benefits as members serving in a combat zone designated by Executive Order.

Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.

You can write to us at the following address:

Internal Revenue Service
Individual Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW, IR-6406
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

You can email us at *[email protected]. (The asterisk must be included in the address.) Please put “Publications Comment” on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

Tax questions. If you have a tax question, visit www.irs.gov or call 1-800-829-1040. We cannot answer tax questions at either of the addresses listed above.

Ordering forms and publications. Visit www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to one of the three addresses shown under How To Get Tax Help in the back of this publication.

Useful Items - You may want to see:

Publication

54 Tax Guide for U.S. Citizens and Resident Aliens Abroad
463 Travel, Entertainment, Gift, and Car Expenses
501 Exemptions, Standard Deduction, and Filing Information
503 Child and Dependent Care Expenses
505 Tax Withholding and Estimated Tax
516 U.S. Government Civilian Employees Stationed Abroad
519 U.S. Tax Guide for Aliens
521 Moving Expenses
523 Selling Your Home
525 Taxable and Nontaxable Income
527 Residential Rental Property
529 Miscellaneous Deductions
553 Highlights of 2004 Tax Changes
559 Survivors, Executors, and Administrators
590 Individual Retirement Arrangements (IRAs)
596 Earned Income Credit (EIC)
970 Tax Benefits for Education
3920 Tax Relief for Victims of Terrorist Attacks

Form (and Instructions)

1040X
Amended U.S. Individual Income Tax Return
1310
Statement of Person Claiming Refund Due a Deceased Taxpayer
2688
Application for Additional Extension of Time To File U.S. Individual Income Tax Return
2848
Power of Attorney and Declaration of Representative
3903
Moving Expenses
4868
Application for Automatic Extension of Time To File U.S. Individual Income Tax Return
8822
Change of Address
9465
Installment Agreement Request

See How To Get Tax Help, near the end of this publication, for information about getting IRS publications and forms.

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