Understanding military taxes is crucial for tax pros due to the unique benefits and deductions available to service members. These complexities require specialized knowledge to ensure accurate filings and maximize potential refunds for military clients.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Do any of these forms or rules apply to National Guard Enlisted Personnel, or is it only in the state they enlist?

A: Yes, they do apply, but only in limited situations. The Guard member must be called to service by the President or the Secretary of Defense for a period of 30 days or more.

Q: Does filing a Form DD2058, State of Legal Residence Certificate, change the home of record?

A: No, filing Form DD2058 does not change a military member’s Home of Record. It is only used to change the state of residency for withholding tax purposes.

Q: If the military pays to return them home, should there be no moving expense deduction on the tax return?

A: If the service member receives a nontaxable reimbursement for moving expenses, they cannot claim a deduction unless their moving expenses exceed the reimbursement amount.

Q: What is ‘MyPay’?

A: MyPay is an online tool for military personnel to manage pay information, view leave and earning statements, and access Form W-2 information.

To learn more about tax planning for military personnel and spouses, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.

Question: Tom, age 36, has a health savings account (HSA) qualified high deductible health plan that just covers him. He wishes to contribute the individual maximum for 2024, $4,150, to the account. Tom’s wife Alice, who is also age 36, has her own HSA qualified high deductible health plan, which covers her and the couple’s two children, Billy and Bobbie, but not Tom. She plans to contribute the family maximum of $8,300 to her HSA for 2024.

If the couple files jointly, are they entitled to a total 2024 HSA deduction of $12,450 ($4,150 + $8,300) for 2024?

Answer: No. If either an individual or the individual’s spouse has family coverage, they are considered to have family coverage through that individual. Likewise, if one spouse has self-only coverage and the other has family coverage, the maximum contribution limit is the maximum for family coverage, and the amount each contributes to reach that limit, is divided between them by agreement (Notice 2008-59, Q&A 17). If the spouses have different family coverage plans, only the one with the lower deductible is counted for HSA eligibility purposes (Sec. 223(b)(5)).

The family contribution amount can be divided between eligible spouses any way they want but must be divided equally among the spouses if they do not agree on a different division. However, no HSA contribution is allowed for an ineligible spouse. The IRS has ruled that an eligible individual does not lose their eligibility when their spouse has non-HDHP family coverage and the spouse’s non-HDHP plan does not cover the eligible individual. Consequently, that individual may contribute to an HSA (Rev. Rul. 2005-25).

Therefore, the maximum deductible contribution for Tom and Alice in tax year 2024 is $8,300, the family maximum. The expected excess contribution of $4,150 should be addressed and adjusted before the year end.

Preparing taxes for farmers involves its own set of challenges because they face tax rules that are different from most other businesses. You need to consider an array of unique tax issues related to farming, such as: government payment programs, farm property depreciation, crop insurance, prepaid farm expenses, commodity wages and farm income averaging.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Are crop insurance proceeds taxable income?

A: Yes, crop insurance proceeds received by a farmer due to physical crop damage or reduction of crop revenue are considered taxable income.

Q: Are barns classified as 20-year property?

A: Yes, barns are farm buildings and have a 20-year recovery period.

Q: If farm workers are paid with crops, does the farmer need to recognize the value of the crops as income before taking a deduction?

A: Yes, the farmer must report the value of the crop as income on Schedule F (Form 1040), Profit or Loss From Farming, Line 2, as if the crop had been sold. The farmer can then deduct the crop’s value as a labor expense on Line 22.

Q: If farmers do not want to show income, can they still treat CCC loans as loan proceeds?

A: Yes, farmers are not required to treat CCC loan proceeds as income. By default, CCC loans are considered loan proceeds unless the farmer elects to treat them as income.

To learn more about preparing taxes for farmers, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.