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Military reservists and National Guard members are entitled to a tax benefit for unreimbursed business expenses for drill mileage, lodging, meals and other incidental expenses – but only if they or their tax preparer can figure out where to include it through their tax preparation software.
This tax break is only available for travel more than 100 miles from home to fulfill duties as a member of the Reserve Component. The Reserve Component is a technical term that includes National Guard and reservists. The Internal Revenue Service refers to this group collectively as “reservists.”
How To Get This Tax Break
These travel expenses go on IRS form 2106, and are reported on line 12 of form 1040 Schedule 1, and can be treated as a deduction from your total income considered for taxation.
Reservists are one of the few groups of people still being given the business travel deduction, along with entertainers and rural mail carriers. The business travel deduction disappeared for most Americans in the last round of tax legislation.
The IRS form 2106 is your typical complicated tax form, it requires you to do the calculations on the bottom of the form and enter the totals on the top. You can calculate your actual travel expense using vehicle depreciation and maintenance costs or take the standard mileage deduction, which is much simpler.
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The 2021 mileage rate is 56 cents per mile. This rate changes annually based on the price of gas and is determined by the IRS. Taxpayers almost always will come out ahead using the standard mileage rate.
Claiming this adjustment can bring big savings to reservists. For example, driving 150 miles one way to drill 11 times per year, 3,300 miles at the rate of 56 cents per mile would be an adjustment to income of $1,848. If the taxpayer’s highest tax bracket was 15%, this would be $277 less federal income taxes that would be paid. In the 25% bracket, that would be a savings of $462.
You can also include tolls, ferry fees and other travel expenses, as well as meals. Remember you can only claim expenses that are not reimbursed and you can only claim a “prudent” expense. That means, you can’t travel to your drill location a week early and write off your hotel stay. That’s a sure way to get audited.
However, if your orders require you to be at a drill location by 6 a.m. you may be able to be reimbursed for a hotel stay. You will be limited to the federal per diem rate for lodging and you need to keep the receipts.
Meals also are an allowable expense, not to exceed the per diem rate.
These expenses are frequently overlooked by tax professionals and by service members, since the law recently changed.
To add to the confusion, most tax software incorrectly categorizes unreimbursed employee business expenses as credits and deductions, which they are not.
This article was written by Jim Absher.
