Tax Tips For Active Duty
When you PCS (Permanent Change of Station), the tax implications can sneak up on you. That once-simple question, “Did you move last year?” can trigger a cascade of paperwork, missed deductions, and potential surprises from the IRS.
Whether you’re moving across state lines, buying or selling a home, or juggling multiple tax jurisdictions, knowing these rules ahead of time can save you money—and headaches.
State Tax Filing After a PCS Move
Relocating to another state usually means you’ll need to file part-year tax returns in both your old and new states. Your W-2 will break down income by state, but you’ll need to reconcile it. Keep in mind that some moving-related costs like storage, travel, or shipment may qualify as deductions—but only under specific IRS rules for active-duty service members.
Buying a Home During a PCS Move
Purchasing a home while relocating opens the door to several tax benefits. You can often deduct prorated mortgage interest, property taxes, and “points” paid at closing. Keep your closing disclosure and settlement statement handy—they contain many of the numbers you’ll need when it’s time to file.
Selling a Home When You Relocate
Selling your primary residence can also carry tax benefits. Military families may be able to exclude up to $250,000 (individual) or $500,000 (joint) of capital gains from taxable income. Even if you haven’t lived in the home for two of the last five years, PCS orders may allow a partial exclusion. Keep renovation receipts, proof of residency, and sale documents organized for tax time.
Understanding Military Moving Deductions
The 2017 tax law changes eliminated the moving expense deduction for most civilians, but active-duty service members moving under PCS orders are still eligible. Eligible expenses include shipping household goods, lodging during travel, and mileage. These deductions cannot overlap with costs already reimbursed, so careful recordkeeping is essential.
Smart Tax Tips for Your PCS Move
The easiest way to maximize tax savings is through preparation. Save receipts for every moving-related cost. Track distances and travel routes if you’re claiming mileage. Know which expenses were reimbursed by the government so you don’t accidentally claim them twice. And whenever possible, consult a tax professional familiar with military moves—they’ll help you navigate both state quirks and federal deductions.
Take Control of Your Taxes Before You Move
As you prepare for your next duty station, don’t let tax surprises catch you off guard. By understanding what deductions are available, keeping your documents organized, and leaning on your PCS Plan, you’ll be ready for whatever tax season brings.
Frequently Asked Questions About Military Moving & Taxes
Do military members still get a moving expense tax deduction?
Yes. While civilians lost the moving expense deduction in 2017, active-duty service members with PCS orders can still deduct unreimbursed moving expenses such as shipping household goods, travel, and lodging.
Do I need to file taxes in two states if I PCS?
Often yes. If you earned income in two different states during the year, you may need to file part-year returns in both states. However, the Military Spouses Residency Relief Act (MSRRA) may allow spouses to keep their original state of residence for tax purposes.
Can I deduct costs when buying a home during PCS?
You can often deduct mortgage interest, property taxes, and some closing costs (like points). Save your settlement statement and closing documents to ensure you capture all eligible deductions.
What happens if I sell my home during a PCS move?
Military families may qualify for capital gains exclusions even if they don’t meet the standard two-out-of-five-year residency rule. PCS orders allow flexibility so you can exclude up to $250,000 (individual) or $500,000 (married filing jointly).
