Miltary Pay and Taxes
The general rule for military pay and tax returns is that soldiers' pay is considered into the gross income category, which is always taxable. Active duty pay, bonus pay and special pay constitute gross income. However, pay earned while in a combat zone or a hazardous area are deemed to be nontaxable. Also, soldiers who are injured from either situation cannot be taxed on the income they return while recovering in the hospital.
Gross Income Rule
Because of the gross income rule, members of the National Guard are required to report any and all pay on their tax returns. Members of the National Guard often work other jobs, either full-time or part-time. As such, any pay from National Guard service would be added to other employment income to tabulate gross income on tax returns. As with civilian taxpayers, members of the National Guard can file for an extension in submitting their 1040 tax forms for up to six months.
As armed forces reservists, National Guard members who travel more than 100 miles for service are able to deduct travel expenses from gross income on line 24 of form 1040. However, this amount is limited to the amount the federal government typically allows its employees to deduct for travel expenses, which includes lodging, meals and incidental expenses. As of publication, the per diem rate is $77 for lodging and $46 for meals and incidental expenses according to the U.S. General Services Administration. However, these expenses must not be reimbursed by the National Guard according to publication
In some states, any form of military pay is either not taxed or certain amounts are non-taxable. For example, in Arkansas the first $6,000 of military pay is not taxable whereas the state of Colorado makes no such allowances for military pay. As with federal income tax returns, National Guard pay also gets filed for state tax purposes.