Members of the United States Armed Forces and their families may be eligible for tax deductions and savings under the Military Family Tax Relief Act. This provision was specially designed to provide financial assistance to military personnel, especially assistance that allows them to take advantage of additional tax credits because of the itinerant nature of their work. To claim these provisions, though, members of the military should become familiar with all the benefits they may qualify for.
What is the MFTRA?
The Military Family Tax Relief Act (MFTRA) was signed into law in November of 2003. Designed to assist military personnel who were serving in the War in Afghanistan, the act eased restrictions on some previous credits that were unavailable to military members. To encourage as many service members as possible to use these provisions, the IRS extended the typical three-year period for amending a tax return so that more military families could go back and claim these increased deductions on returns they had already filed.
Provisions of the MFTRA
One of the major provisions in the MFTRA was the new definition of the tax term "principal residence." In order to claim the taxable gain exclusion from the sale of a private residence, a taxpayer must live in the home for at least five years. This requirement kept members of the Armed Forces rom being able to claim the exclusion, since they are usually required to move frequently. Under the MFTRA, active duty personnel qualify for a 10-year exemption from this residency requirement. To be eligible for the exemption, service members must be ordered to reside in government housing for a period of at least 90 days. The temporary housing facility must also be located at least 50 miles from the original home.
Another significant provision of the act was the increase in the amount of death benefits paid to surviving family members of soldiers who are killed in action. The original provision was $6,000, of which $3,000 was exempt from federal income tax. Under the revised act, this death benefit was doubled to $12,000, all of which is now exempt from income tax.
One other notable adjustment was the addition of a deduction for travel expenses incurred by members of the National Guard. If these service members travel at least 100 miles from home for work, they can deduct the cost of transportation expenses, lodging and meals that are not reimbursed. The amount they can claim is subject to the standard per diem limits for federal government employees. National Guard members can calculate their total expenses using Form 2106 or Form 2106-EZ and then transfer the total to Page 1 of Form 1040 as an adjustment to income.
If you or a member of your family are currently serving in the United States Armed Forces, you should find out if you are eligible to benefit from the MFTRA. Claiming these credits may make a substantial impact on your federal tax liability this year.