Military Family Tax Relief Act Overview

military family tax relief act

Learn more about the Military Family Tax Relief Act!

If you are currently serving in the military, you should take a moment and educate yourself about the Military Family Tax Relief Act.  Whether you owe back taxes to the IRS, or are in good financial shape, you should know how the law affects you.  Here are a few things you should know about the program.

  • It was signed into legislation in November 2003 by President Bush
  • If you own a home, you can suspend (up to 10 years) the running of the five year ownership and use the period before the sale of a residence.
  • If you are in the Army Reserves or Army National Guard and travel more than 100 miles to your unit, you may deduct non-reimbursed travel expenses to include transportation, meals and lodging.  Make sure you keep records of these expenses so you can input this information on Form 1040 when you do your income taxes.
  • Payments made after Nov. 11, 2003, under this program to offset the adverse effects on housing values of military base realignments or closures will be excludable from income as a fringe benefit.
  • If you served in a combat zone or in a contingency operation, as designated by the SEC DEF, you will be eligible for certain tax filing extensions.  Talk with a tax professional to find out how this works.
  • Clarifies that dependent care assistance programs for military personnel are excludable benefits. Effective for tax years after 2002.
  • The ten percent tax on payments from a Qualified Tuition Program or Coverdell Education Savings Account that are not used for educational expenses does not apply to attendees of the U.S. Military, Naval, Air Force, Coast Guard or Merchant Marine Academies, to the extent the payments do not exceed the costs of advanced education. Effective for tax years after 2002.

Once again, this is just a brief summary of the Military Family Tax Relief Act.  I have not covered EVERYTHING in the Act, nor am I a licensed attorney or CPA.  If you have a specific question, make sure you talk to a qualified individual.   My only goal today was to provide you an overview of what is in the legislation.

My advice to you is to:

1)     Read the Law: Print out the Military Tax Relief Act and read it, so you know what pertains to you (or might in the future) and what doesn’t.

2)     Consult with JAG or S1: If you have questions, consult with a licensed professional.  Start with your S1 or JAG.  If they can’t help you out, consider consulting with a CPA or licensed attorney.

Sources:

http://www.irs.gov/uac/Highlights:–Military-Family-Tax-Relief-Act

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7 thoughts on “Military Family Tax Relief Act Overview”

  1. Thank you for sharing this information, This is a perfect information to know. I must make such to remember them. I’m going to keep all the receipt and good records as posted above, for tax time..

  2. The Military Family Tax Relief Act is certainly something every military member should take the time to learn more about. The act is quite detailed, and has a whole host of provisions that benefit just about any military member to some degree. It even provides for compensation for a loss through a home sale due to reassignment or base closure. There are some good websites available for guidance. Keep all receipts and good records, as discussed above, for tax time. I use Turbo Tax myself, Chuck, and it is very thorough and easy to work with, especially for someone, like me, who cringes at the thought of doing taxes.

  3. Another great tax benefit that I’ve used twice now is the fact that the Combat Zone Tax Exclusion makes most service members eligible for the Earned Income Tax Credit (EITC) for the tax year they deploy. (It’s a matter of what your income is like, and if your deployment straddles two years, it may not work out. I was lucky in twice serving almost an entire calendar year in a combat zone.) This means additional money (up to a few thousand dollars) in your refund over and above any federal income tax you paid. The EITC rules change from year to year, and your eligibility depends on your exact tax situation, including how many dependents you have, what specific deductions you take, and whether your spouse has a significant amount of income, not to mention your military pay (field grade officers may be out of luck). But when you file taxes for a year you were deployed, make sure you check to see whether you’re eligible for EITC–you’ve earned it.

    1. Great point. The EITC is a huge tax credit. If you can legally qualify for it, you should use it. If you aren’t good at doing your taxes yourself, it might be in your best interest to sit down with a qualified tax professional. The money you spend will be money well invested.

      Chuck Holmes

  4. Good information to know. I will definitely remember them, particularly because my unit is 100+ miles away in Pennsylvania. Will definitely be keeping my receipts. Thanks, Chuck!

    1. Justin,

      I’d buy a mileage log at Office Depot or Office Max and record your mileage to and from drill weekend. If you get stuck at a hotel during drill weekend and aren’t reimbursed by your unit or the Army, keep a receipt for your records. If you do your own taxes, programs such as Turbo Tax ask you all the right questions so you can input it yourself. If you use a CPA or tax service like Jackson Hewitt or H&R Block, make sure you bring it up with them so then can add it to your Form 1040.

      Thanks for the comment.

      Chuck

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