Military Pay
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MILITARY PERSONNEL

Legislative Update as of April 4, 2003: Although there are several bills in the Legislature to give tax breaks to those serving in the military, none have been passed as of this date. Typically, legislation is signed no later than June.

Iowa Extension Information:
Iowans in the armed forces who serve in an area designated as a qualified hazardous duty zone and/or combat zone
will be given additional time to:

  • file income tax returns
  • file appeals on tax matters
  • file claims for refunds for any type of tax administered by the department
  • file returns for taxes other than income tax
  • perform other acts such as making timely contributions to individual retirement accounts, and
  • make tax payments other than withholding payments.

Iowa follows the IRS qualifications with an exception. The IRS extension applies to combat zone personnel and support personnel deployed overseas. Iowa does not limit support to overseas service. Therefore, for example, a National Guard soldier from Iowa who is deployed to another state or country qualifies for the extension for Iowa income tax filing.

The additional time period for filing state returns and performing other acts is 180 days after the person leaves the combat zone or hazardous duty area, which is the same time period as allowed by Federal income tax law. To learn more, go to the IRS Web page for military extensions.


IRS New Military Web Page:
The Internal Revenue Service specifies which combat zones qualify for special income tax considerations. This link will take you to the IRS Web page addressing military income tax. On this IRS page, you will find links to:

  • Questions and Answers on Combat Zone Tax Provisions: military pay exclusions, deadline extensions and miscellaneous provisions for qualifying taxpayers
  • Publication 3, Armed Forces' Tax Guide, which addresses a wide range of issues that may affect members of the military
  • IR-2003-43: Tax Assistance for Military Families
  • Fact Sheet 2003-11: Information for Taxpayers Serving in the Armed Forces
  • Tax Tip 2003-41: Reservists, New Enlistees May Get Deferral for Back Taxes
  • Notice 2002-17: Tax Relief for Those Involved in Operation Enduring Freedom

RESIDENCY

Active-duty military service pay is taxable only by the state in which the armed forces service member is a legal resident, which is usually the state of residence at the time he/she enters the service. Income of Iowa residents in military service is taxable to the same extent as it is taxable for Federal purposes, even if the Iowa residents are stationed outside of Iowa or outside of the United States.

To make a change of residence, you must have physical presence in the new state as well as show intent to establish residency in that state. Intent can be shown by registering to vote, recording a last will and testament, purchasing a home for use as your principal residence, and complying with the income tax laws of the other state if the state has an income tax. Form DD 2058 must also be filed with the military payroll office. A combination of these actions is required to change your state of legal residency.

A spouse of an Iowa resident in the armed forces who was a resident of another state at the time of their marriage will generally not be considered an Iowa resident until he or she has lived in Iowa with the resident spouse.


FORGIVENESS OF TAX

Iowa income tax is forgiven if:

  • the deceased was killed in a combat zone, or
  • the taxpayer is missing in action and presumed dead, or
  • the deceased was killed outside the United States due to terrorist or military action while he/she was a military or civilian employee of the United States and
  • the person's federal income tax was forgiven

Single status: Iowa income tax is forgiven for the tax year in which the individual was killed or was missing and presumed dead and for the tax year prior to the year of death.

Married / year of death: If the deceased was married at the time of death, all tax is forgiven for the year of death if the filing status is joint or married filing separately on the combined return for that tax year.

Married / prior year: All tax is forgiven if the deceased was married at the time of death and a joint return or a married filing separate return was filed for the year prior to death. Please note that if the deceased had filed using the married filing separately on the combine return status, only the state income tax attributable to the deceased will be forgiven. Prior-year returns cannot be amended to change the filing status.