Tax Info
 

For those on active duty and for you parents who have kids in a combat zone.


Dear Mr. Melvin:

Knowing of our shared concern for military families, I wanted to
alert you to some of the many tax benefits for those serving our
country. In this time of war, we should not forget how stressful
everyday life can be, not only for our service members abroad, but
also for the military families back home that have to pay the bills,
get the kids to school, and manage a household.

First and foremost, there are a number of special provisions to
assist families that have a member serving in a combat zone.
Military families can exclude from taxable income pay received by
a family member while in the combat zone, or pay received while
in a hospital for combat zone related injuries. Also, the IRS will
suspend any collection, audit, or other enforcement action until
180 days after the service member leaves the combat zone. The
IRS suggests that military families who are in one of these
situations notify the agency of their special status by emailing the
name, home address, date of birth, and date of deployment of the
service member to combatzone@irs.gov.

Another important change Congress passed last year ensures that
families with someone serving in a combat zone are eligible for the
earned income tax credit and the refundable child tax credit.
Because of a glitch in the law, these hard-working families were
actually penalized by their service and could not receive these
important benefits. While this fix is only temporary, I believe that
these two changes should be a permanent part of the law.

Other important tax benefits military families should be aware of
include:

* An above-the-line deduction for Reservists and
members of the National Guard for travel expenses
associated with Reserve or Guard duties if more
than 100 miles from home.
* An automatic extension of filing deadlines for
anyone serving in a combat zone. Taxpayers should
mark in red "COMBAT ZONE" and the
deployment date at the top of any return, and should
mark and return any notices received from the IRS
the same.
* Up to a 10-year suspension of the normal five-year
ownership and use test period so that military
personnel on qualified official extended duty can
still qualify for the $250,000 ($500,000 married
filing jointly) exclusion of gain on the sale of a
principal residence.
* An increase in tax-free government payments to
families of fallen servicemen and women.

To learn more about these and many other benefits available to
military families, please read Publication 3 at www.irs.gov, or feel
free to contact me or my staff for a copy of this publication or
other questions.

Finally, I would like to tell you about an important change to the
federal tax code that will benefit all Washingtonians who itemize
their federal income tax returns. Last year, I led the fight to restore
a sales tax deduction to the federal tax code. As a result, for the
first time in nearly twenty years, Washington state taxpayers can
deduct state and local sales taxes from their federal income tax
returns. To learn more about the deduction and whether your
family can take advantage of it, please visit my web site at
cantwell.senate.gov.

I am profoundly grateful for the service of America's military
personnel and for they and their families have made in protecting
our country and our freedoms. We have an important
responsibility to ensure that men and women in uniform and their
families are provided the benefits and assistance that they have
earned and so greatly deserve. Promoting greater fairness in our
federal tax system is just one way I believe we can recognize their
service. If you have any questions about any of these tax services,
please feel free to contact me or my staff.

Sincerely,

Maria Cantwell
United States Senator