In the military? Don't miss out on these tax benefits

CNN Money

Tax-free combat pay: Like anyone else with a paycheck, enlisted military personnel's pay is subject to income tax. But if you're assigned to a designated combat zone or to a unit that directly supports military action in a combat zone, your pay during that assignment is excluded from federal income taxes. Combat pay for officers is also tax free, but only up to the amount that the highest-paid enlisted soldier makes -- which is roughly $5,460 a month, said Rochester, N.Y.-based CPA David Young, a combat veteran and retired Lieutenant Colonel from the U.S. Army Reserve. Combat pay is also free of state taxes in every state but New Jersey, said Julie Sforza-Smith, a principal tax research analyst at H&R Block's Tax Institute. Greater flexibility in claiming the Earned Income Tax Credit: Normally you have to have earned taxable income to qualify for the Earned Income Tax Credit, which is intended to help lower income households, especially those with children.