On Nov. 11, 2003, President
Bush signed into law the Military Family Tax Relief Act of 2003. Among
its provisions are these tax breaks related to military personnel:
Deduction for overnight
travel expenses of National Guard and Reserve members
Reservists who stay overnight more than 100 miles away from home while
in service (e.g., for a drill or meeting) may deduct unreimbursed
travel expenses (transportation, meals and lodging) as an above-the-line
deduction. The deduction is limited to the rates for such expenses
authorized for federal employees, including per diem in lieu of subsistence.
Effective for tax years after 2002. For 2003, taxpayers will use Form
2106 or 2106-EZ to figure the deduction amount and carry it as a “write-in”
to Form 1040, line 33, putting the letters “RC” and the
amount on the dotted line and including this subtraction in the entry
for line 33.
The death gratuity paid to survivors of deceased Armed Forces members
rises to $12,000 and is not taxable (was $6,000, with $3,000 tax-free).
Effective for deaths occurring after 9/10/2001. Taxpayers amending
a return to use this provision should put “Military Family Tax
Relief Act” in red in the top margin of Form 1040X.
Sale of principal residence
A taxpayer on qualified official extended duty in the U.S. Armed Services
or the Foreign Service may suspend for up to 10 years of such duty
time the running of the 5-year ownership-and-use period before the
sale of a residence. This applies when the duty station is at least
50 miles from the residence – or while the person is residing
under orders in government housing – for a period of more than
90 days or for an indefinite period. This election, which is an option
for the taxpayer, applies to only one property at a time. Retroactive
for home sales after May 6, 1997. Although taxpayers normally have
only three years to file an amended return, qualifying taxpayers who
sold a residence before 2001 have until Nov. 10, 2004, to amend their
returns for this purpose. Taxpayers amending a return to use this
provision should put “Military Family Tax Relief Act”
in red in the top margin of Form 1040X.
Dept. of Defense Homeowners Assistance Program
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.
Combat zone extensions expanded to contingency operations
The various extensions granted to combat zone participants to file
returns or pay taxes will also apply to those serving in Contingency
Operations, as designated by the Secretary of Defense. Effective for
any acts whose deadline has not expired before Nov. 11, 2003.
Dependent care assistance programs
Clarifies that dependent care assistance programs for military personnel
are excludable benefits. Effective for tax years after 2002.
Military academy attendees
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.
For more info:
Helps Military Personnel Get New Law's Tax Breaks