For those serving in a designated "combat zone" -- whether you are in the military or a civilian working in support of our troops -- there is a wealth of information available on the Internal Revenue website: www.irs.gov. A great search engine to help you locate the specific information you're looking for.
Also, please check out two previous columns which dealt with special privileges for military personnel such as "Financial Tips for Our Military Personnel" and "More Financial Tips for our Military Personnel," which covered the Soldiers and Sailors Civil Relief Act (SSCRA).
While I was stationed in Alaska I bought two vehicles. There is no sales tax in Alaska. Because I was ordered to move by the Air Force, I now live in Louisiana. In order to register my cars here, Louisiana law says I have to pay the sales tax on them. For me that is almost $8,000 dollars to register my vehicles here! It is not like I lived here and went out of state to buy then, I was moved here by the military.
Dear Jeff --
First, state law rules when it comes to registering your vehicle. And Louisiana law is a doozy.
For starters, while most states give you a grace period of generally 30-60 days to register your car, this is supposed to be done "immediately" in Louisiana. Louisiana law also requires that a sales/use tax be collected (in addition to your registration fee) on all vehicles moved to the state. The amount of tax depends upon the parish you live in and can run as high as 9%. The tax is based on the fair market value of the vehicle, so your tax won't be on the actual price you paid in Alaska. A car dealer ought to be able to look up the "Blue Book" value for you.
However, if you check out the website for the Louisiana Office of Motor Vehicles, and look up "vehicle tax," you'll see that this tax is waived in the case of active duty military personnel. Maj. Rene Poche is an Air Force public affairs officer in the New Orleans area. He suggests you "bring a copy of your orders showing you were required to transfer to Louisiana" or your Active Duty ID card when you register your cars. That ought to suffice.
Can you offer any financial advice for the hundreds -- if not thousands -- of Civil Servant employees currently serving in the Middle East in direct support of Operation Iraqi Freedom? From what I've been able to glean thus far, we are not entitled to a Combat Zone Tax Exemption like our active duty military counterparts. We do qualify for hazardous duty pay, but still have to pay income tax on it, right?
Dear Gary -
As things stand right now, three main areas of the world are considered combat zones:
- The Middle East area: this includes, the Persian Gulf, Red Sea, Gulf of Oman, Gulf of Aden, the countries of Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Israel, the eastern part of the Mediterranean Sea.
- The Kosovo area: includes Serbia, Monenegro, Bosnia Herzegovina, Croatia, Macedonia, Albania, the Adriatic Seas and the Ionian Sea north of the 39th parallel.
- The Afghanistan area: includes Pakistan, Tajikistan, Jordan, Incirlik Air Base (Turkey), Kyrgyzstan, Uzbekistan, Philippines, Yemen, Djibouti.
You are correct: active military personnel serving in a combat zone can exclude their military pay from gross income. In other words, they never have to pay income tax on this. This privilege does not extend to civilian employees. They merely get to postpone paying income tax.
According to the IRS:
"Neither federal civilian employees nor civilian defense contractors deployed with U.S. forces qualify for an exclusion of income earned while working in a combat zone or qualified hazardous duty area."
However, as a civilian working in support of our military in a combat zone, you are eligible for an extension in filing your income tax return. You don't have to do this until at least 180 days after you leave the combat area. Here's how to figure this out (the same approach applies whether you are active duty military or a civilian in support of a military operation in a combat zone):
Say you landed in the Iraqi theater of operations on Jan. 10 of this year. This week your employer notifies you that that you will be departing on Sept. 20.
For most Americans, the deadline for filing their 2002 tax return was April 15 of this year. However, because you were working in a combat zone, during the Jan. 1-April 15 tax filing period, you get to postpone filing your 2002 return. Here's how to figure when it's due:
First, you get credit for the 95 days prior to the April 15 filing deadline during which you were in the combat zone. Add 180, for a total of 275.
This means you have 275 days from the date you leave the combat zone (not the date you arrive back in the U.S.), to file your 2002 tax return. In this case that would be June 21, 2004 (don't forget it's a leap year!).
Note that your 2003 tax return is still due on April 15, 2004, i.e. before your 2002 return.
Hope this helps,
My husband is serving in Operation Iraqi Freedom and has been deployed since October of last year. Our last duty station was Italy during which we managed to get in a real bind with our car payments (nobody's fault but our own). At the time, our car payments were made to AmeriCredit. When we returned to the states, AmeriCredit transferred our account to another company, Vengroff, Williams & Associates. We contacted them and set up a payment plan that was perfect for us! We got on track and our payments were up to date.
Then after my husband left for Kuwait (and two weeks before Christmas), a man knocked on our door saying he was from AmeriCredit and HAD to repossess our car! I panicked. I was in a new town and didn't know anyone. I called Vengroff, Williams and was assured this was a mistake. Nonetheless, this man insisted upon taking our car, saying he wouldn't make any money if he didn't return with it.
I eventually got the car back, but it was an awful experience. This car is my husband's pride and joy. He even asks about it during the brief phone calls we've had during his deployment. I'm still upset by what happened. Is there something else I could or should have done?
Thanks for listening,
Never forget that the U.S. military takes care of its own. You have a very powerful ally in the form of the JAG office on your base. (These folks really exist; they're not just on TV!) The attorneys on duty in the Judge Advocate General's office are there to help you. I know it's been a while since this occurred, but you might be eligible for some compensation.
In the very least, I would look into reimbursement for expenses, such as any long distance phone calls you needed to make during this experience and the cost of a rental car. Stop by your JAG office, explain what happened and see what they suggest. In many cases, they will write the company on your behalf. That generally gets their attention!
I am a civilian pursuing an opportunity to become an Air Force officer. When I go on active duty, I will make approximately 50% of my current annual salary. I'd like to point out that most people focus on the benefits of the SSCRA for reservists. Many miss the fact that it covers ANYONE who is going into active duty service. So for officer trainees like myself or enlistees, this can be a big help.
Great point! Thanks for bringing this up. And best wishes in your career change,
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