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Veterans Day 2010: Tax considerations for members of the military

Today is a special day, so momentous that if defies the usual American tendency to diminish holidays in order to accommodate mundane aspects of our lives, such as three-day weekends or retail sales.

Flag_USNov. 11 is Veterans Day.

On the 11th hour of the 11th day of the 11th month of 1918, an armistice, or temporary cessation of hostilities, was declared between the Allied nations and Germany in World War I, then known as the Great War. Armistice Day commemorations began the following year.

In 1938, Nov. 11 became a legal federal holiday in the United States. Following World War II and the Korean War, Armistice Day became known as Veterans Day.

Now each November, this day is dedicated to American veterans of all wars. (It's still called Armistice Day, or Remembrance Day, in Great Britain.) 

We can disagree about the reasons for and decisions made to fight wars. But there is no disputing that the men and women who volunteer to serve in America's armed forces deserve our gratitude and respect, not only on Veterans Day, but every day, during peace time and in conflict.

Thank you to all who have served and are serving.

If you know or see a veteran today, please thank him or her for service to our nation. And if you have a chance to attend one of the many ceremonies across the country today, please do so to show these brave men and women how much you appreciate what they do.

Taxes and members of the military: Members of the military, like us civilians, must pay taxes. However, they do get a some special tax considerations.

Combat pay, compensation that many of our service men and women are receiving right now, is treated differently.

Some of it can be excluded from pay for tax purposes. But military members also can elect to include nontaxable combat pay in earned income for purposes of claiming the Earned Income Tax Credit (EITC).

The IRS has a special Web page with official information on taxes and the military. Also check out the agency's 10 military tax tips and complete information in IRS Publication 3, Armed Forces' Tax Guide.

TaxProf Blog also has a lengthy list of official government links to tax resources for service personnel.

And don't forget about your state.

Many states offer special tax breaks for current members of the military as well as retirees receiving armed services' pension income. has compiled a comprehensive list of state tax laws affecting service personnel.

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