Tax Filing for Military and Contractors Overseas
Military personnel, contractors, and federal employees overseas have unique tax rules. FileAbroad helps you navigate combat zone exclusions, foreign earned income rules, and state tax obligations.
Common Challenges
You are unsure whether combat zone pay is taxable.
You are a contractor working on a US base and are unsure about FEIE eligibility.
You need to understand how the Servicemembers Civil Relief Act affects your state taxes.
You have income from both US and foreign sources and are unsure how to report it.
You need to file state taxes but are unsure which state is your domicile.
How FileAbroad Helps
Determine whether your overseas income qualifies for the combat zone exclusion, FEIE, or neither.
Prepare your return with proper allocation of US and foreign income.
Advise on state tax domicile and the Servicemembers Civil Relief Act.
Calculate foreign tax credits for tax paid to host countries.
Provide a written scope and exact quote before any work begins.
Resources for Military & Contractors Abroad
Pricing
Military and contractor returns vary based on income sources, combat zone status, and state domicile. Straightforward cases start at $575. Complex cases with mixed US and foreign income receive a custom quote.
Frequently Asked Questions
Is combat zone pay taxable?
No. Military pay received while serving in a combat zone is excluded from gross income for federal tax purposes. This includes basic pay, reenlistment bonuses, and incentive pay. Officers are limited to the highest enlisted pay plus imminent danger pay. The exclusion does not apply to civilian contractors.
Can contractors claim the FEIE?
It depends. Contractors working overseas may qualify for the FEIE if they meet the Physical Presence Test or Bona Fide Residence Test. However, if you are working on a US military base and your tax home is considered to be in the US, you may not qualify. Each case requires individual analysis.
How does the Servicemembers Civil Relief Act affect state taxes?
The SCRA allows military personnel to maintain their state of legal residence (domicile) for tax purposes regardless of where they are stationed. If your legal residence is a no-income-tax state like Texas or Florida, you can avoid state income tax even if stationed in a high-tax state. This does not apply to civilian contractors.
Do I owe state tax if I am stationed abroad?
For military personnel, state tax depends on your state of legal residence (domicile), not your duty station. If your domicile is a state with income tax, you may owe state tax. If your domicile is a no-tax state, you generally do not. Civilian contractors are subject to the state tax rules of their actual state of residence.
Can I exclude housing allowances from tax?
Military Basic Allowance for Housing (BAH) and Overseas Housing Allowance (OHA) are generally not taxable for military personnel. Civilian contractors do not receive these military-specific exclusions, but they may qualify for the Foreign Housing Exclusion or Deduction under the FEIE if eligible.
Questions About Military & Contractors Abroad Taxes?
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