The Waterbury Democrat., 1945-01-19
By s. BURTON HEATH NEA StaR Writer

The first l,500 of active service pay Is entirely tax free. It is import ant to understand this exemption. It is not a $l 500 special or addition al exemption against any income, but it applies only to service pay. AS much of the exemption as is not needed for service pay is lost. how ever great may be the service mans taxable income from other sources.
 Some servicemen have one other potential tax exclusion. That is pay earned, under certain circumstances, in possession of the United States. (This applies also to civilians under similar conditionsl. For this pur- pose possessions are American Sa- moa (Manua, SwainS, Tutuila) {: Baker, Guam, Rowland and Jarvis islands; Kingman Reef; the Mid- way and the Philippine Islands; the Canal Zone, Sand Island Wake 1s- land tPeale, Wilkes; Pribilof IS- lands; Puerto Rico; Navassa; Seran- fila Bank; Swan Islands.
 The formula for determining whe- ther pay earned in these poSsesisoas is subject to tax is too complicated for explanation here. If you have served ill any Of them during the year should consult an officer who has made a study of this matter. TAXABLE INCOME
 The following items peculiar to seiYicemen are taxable as income:
 Active service pay in excess of Sl 300 including base, longevity, sea, foreign service, flight and other spe- cial duty pay.
 Mileage allowance for travel; transportation allowance for de- pendents; travel pay to discharged enlisted men
 Retired pay, unless retirement was for physical disability; and one years pay to officers wholly retired.
 Anything received from peace time employer, whether paid to the serviceman or to his dependents. NON-TAXABLE INCOME
 The following items peculiar 10 a Serviceman are not taxable and do not have to be reported or conSid- cred in determining whether or not return must be made:
 The first $500 of service pay. Rental allowance or the value of quarters, light or heat provided by the services; or money allowance for quarters, paid to enlisted men. Sub sistence allowance. per diem allow ance i'll lieu of subsistence, or ra- tionS or communication Of rationS for enlisted men. Uniform allowance, or the value of uniforms provided. Personal cash allowance to high general officers. Reimbursement to cover losses due to appreciation of foreign currencieS. Family allowance paid by Government to wife or de- pendents of enlisted personnel. Mus tering out pay. Gratuity to benefl- ciary of deceased servicemen. Re- tired pay of persons retired for phy- Sical disability incurred in line of duty.
 BUSINESS DEDUCTIONS
 From gross income. as business expenses, the Serviceman can de- duct the following, which are serv- ice variations of items deductible by civilians
 Actual expense of travel paid out of mileage allowance; or where a per diem allowance was made, any excess of actual expenses over that per diem. The excess of naval off, cer's mess bills while an duty afloat, or an army officers in the field, above his subsistence allowance provided the officer has a home from which duty keeps him away; if he does not maintain such a home, he can not make this deduction.
 These and any business expenses mentioned in the articles for civil fans can be deducted from gross income before that is entered in Item ? on page of Form 1040.
 OTHER DEDUCTIONS
 The serviceman who has to file a return must use Form l04O be-