35.1 Taxable Armed Forces Pay and Benefits

Armed Forces personnel report as taxable pay the following items:

• Basic pay for active duty, attendance at a designated service school, back wages, drills, reserve training, and training duty.
• Special pay for hazardous duty, hostile fire or imminent danger, aviation career incentives, diving duty, foreign duty (for serving outside the 48 contiguous states and the District of Columbia), medical and dental officers, nuclear-qualified officers, and special duty assignments.
• Enlistment and reenlistment bonuses.
• Payments for accrued leave, and personal money allowances paid to high-ranking officers.
• Student loan repayment from programs such as the Department of Defense Educational Loan Repayment Program when year’s service is not attributable to a combat zone.

State income tax withholding.

A state that makes a withholding agreement with the Secretary of the Treasury may subject members of the Armed Forces regularly stationed within that state to its payroll withholding provisions. National Guard members and reservists are not considered to be members of the Armed Forces for purposes of this section.

Caution

Community Property

If you are married and your domicile (permanent home to which you intend to return) is in one of the following states, your military pay is subject to community property laws of that state: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. See 1.6 for community property reporting rules.

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Where and when to file.

Mail your return to the Internal Revenue Service Center for the place you are stationed. For example, you are stationed in Arizona but have a permanent home address in Missouri; you send your return to the Service Center for Arizona. For filing extensions on entering the service (35.7).