Tax Benefits For Military Families

By Elizabeth Saloom, November 4, 2003

Legislation introduced to help low-income families is designed to benefit approximately 290,000 military families, according to Sen. Blanche Lincoln, D-Ark. She sponsored the Relief for Working Families Tax Act of 2003 to increase the refundability of the child income tax credit.

Her legislation would extend the tax credit to families whose income is between $10,500 and $26,625 a year. Of the 300,000 soldiers in combat zones throughout the world, 192,000 will have earned an income below $26,625 during 2003.

Sen. Charles Grassley, R-Iowa, sponsored a related bill this year to accelerate and make permanent the $1,000 child tax credit-making the 15 percent refundable portion of the credit effective this year instead of waiting until 2005, and increasing the income threshold amounts for joint filers and for those who are married but filing separate returns.

Legislation sponsored in the House by Rep. William Thomas, R-Calif., amends the Internal Revenue Code to increase the refundability of the child tax credit to 15 percent rate, and includes combat pay, which is now otherwise excluded from gross income. His bill increases the threshold amount for applicable joint filers to $115,000 for 2008 and 2009 and sets it at $150,000 starting in 2010.

In the House and Senate versions of this legislation, the families of astronauts who lose their lives on a space mission also would receive tax relief.

Another pertinent piece of legislation passed by the House and Senate is the Armed Forces Tax Fairness Act of 2003. Under it, full military death gratuity payments of $6,000 to survivors would be excluded from taxation. Currently, half the amount is taxed. Childcare benefits provided military personnel would be not taxed.

In addition, profit from the sale of a home would not be taxed for military and Foreign Service personnel stationed overseas on government assignments. Normally, individuals can exclude up to $250,000, or $500,000 for married couples-if they live in their property for two of the five years preceding the sale.