VETERANS TAX RELIEF 7 June 2008
Posted by Service Officer on June 7th, 2008
The House and Senate passed H.R.6081, the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008 which will provide more than $1.2 billion dollars in tax relief to benefit America’s veterans and soldiers. The Senate Finance leaders worked closely with House colleagues, especially Ways and Means Committee Chairman Charlie Rangel, to combine their own military tax relief bill – the Defenders of Freedom Tax Relief Act of 2007 – with an earlier version of the House’s HEART Act. HEART was approved by the House of Representatives on 20 MAY. The legislation includes tax cuts for members of the military who are receiving combat pay, saving for retirement, or purchasing their own homes. It also helps civilian employers of military men and women keep jobs available for soldiers who are called to active duty. Final HEART Act provisions, including many originally introduced by Baucus and Grassley in the Defenders of Freedom Act, include:
• Allow disabled veterans to file up to 5 years of amended tax returns to recoup taxes when VA processing delays result in retroactive benefits.
• Allow members of the armed forces who have non-citizen spouses to qualify for the economic stimulus rebate.
• Make permanent the ability to include combat pay as earned income for purposes of the Earned Income Tax Credit.
• Make permanent the provision that permits active duty reservists to make penalty-free withdrawals from retirement plans.
• Allow survivors to roll over military death gratuity payments into tax-advantaged savings accounts.
• Permit reserve component members to withdraw money from flexible spending accounts without penalty .
• A tax cut for small businesses when they continue paying some salary to members of the National Guard and Reserve who are called to active duty.
• A permanent allowance for soldiers to count their non-taxable combat pay when figuring their eligibility for the earned income tax credit, a refundable federal income tax credit that puts cash in the hands of low-income working individuals and families.
• The ability for active duty troops to withdraw money from retirement plans, and an allowance of two years to replace the funds without tax penalty.
• A 180-day period for Reservists called to active duty to use unspent funds in a health flexible spending account or cafeteria plan.
• The ability for military families to count most military cash allowances beyond basic pay to be treated as earned income for purposes of determining Supplemental Security Income (SSI) eligibility and benefit amounts, and treat certain housing payments as in-kind support and maintenance.
• A one year extension of parity between mental and physical health benefits.
• A permanent allowance for all veterans to use qualified mortgage bonds to purchase their homes.
• Authority for the IRS to treat gifts of thanks from states to veterans—such as payments of excess state revenue—as nontaxable gifts.
• The ability for blind, disabled, and aged veterans to disregard state annuity payments when determining Supplemental Security Income eligibility and benefits.
• The ability for families of Reservists killed in the line of duty to collect life insurance and other benefits provided by the civilian employer.
• An end to cumbersome rules for reporting of income when companies continue paying some salary to members of the National Guard and Reserve who are called to duty. This makes it easier for reservists to file their taxes and simpler for employers to keep contributing to those employees’ retirement plans.
• Increases the penalty for people who fail to file their tax returns and allows the Social Security Administration and the Veterans’ Administration to work together to verify low-income status when distributing veteran’s benefits.
Baucus said that he would continue to work for additional provisions aiding America’s military men and women in the coming days. Both the House and Senate passed multiple versions of this legislation last year, but got hung up negotiating minor differences. Congress finally got past the haggling and acted on this measure to end tax inequities now imposed on the military community. [Source: MOAA Leg Up 23 May 08 ++]
