Understanding Military Tax Benefits
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While military personnel are citizens of the U.S. and are required to pay taxes just as civilians, there are some tax benefits offered by the government that those who have been in the military can take advantage of if they are aware of them.
IRA Benefits For ReservistsAccording to the Pension Protection Act of 2006, military reservists who are called to active duty are allowed to take payments from their IRAs, 401(k)s and 403(b)s without a penalty tax. Civilians normally must pay a 10 percent early distribution tax for receiving payments prior to their 60th year. The reservist must be called to active duty for at least 180 days to be eligible.
Family Tax Relief For Military PersonnelThe government has provided a number of tax breaks for military families as part of the Military Family Tax Relief Act of 2003. These include removing the tax on the death benefit for family members of deceased servicemen and women, a suspension of the five year ownership and use period before selling a home, a deduction for travel expenses for reservists who spend nights more than 100 miles away from home, a provision that money received under the Homeowners Assistance Program is not taxable as income, clarification that dependent care assistance program benefits are not taxable and tax extensions for those involved in contingency operations.
Tax Relief For Those Serving On Active DutyMilitary personnel who are currently serving or have served in the operations in either Afghanistan or Iraq may be entitled to tax relief. Further information on the tax relief options for your specific military operation can be found at IRS.gov. You may also wish to consult a tax professional before submitting your return if you believe you are entitled to tax exemptions or relief due to your military service.
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