To show our appreciation for America's finest young men and women, TaxBrain offers all military personel a 20% discount. Simply identify yourself as a member of the military at the start of the questionnaire and your 20% discount will be applied automatically when you checkout.

Military personnel and their families can benefit from several new tax breaks. The Military Family Tax Relief Act of 2003 allows, among other things, certain benefits and gains to be excluded from income on the federal income tax return. Reporting a lower income reduces the amount of taxes owed.

Death Benefits
For deaths occurring after September 10, 2001, the new law doubles the benefit paid to survivors of deceased Armed Forces members from $6,000 to $12,000 and makes that entire amount tax-free. Previously, only $3,000 was tax-free and the remaining $3,000 was taxable.

Recipients who have already paid tax on benefits received for deaths after September 10, 2001, may file an amended return on IRS Form 1040X, Amended U.S. Individual Income Tax Return. On the return, they should reduce their adjusted gross income by the $3,000 they had previously reported as taxable on a federal income tax return and put the words “Military Family Tax Relief Act” in red at the top of the amended return to speed processing. Those who receive death benefits in 2003 and future years will not have to report them on their tax returns.

Home Sales
For homes sold after May 6, 1997, a taxpayer on qualified official extended duty in the U.S. Armed, Uniformed or Foreign Services may suspend, for up to 10 years of such duty time, the running of the 5-year ownership-and-use period before the sale of a residence. This applies when the duty station is at least 50 miles from the residence — or while the person is residing under orders in government housing — for a period of more than 90 days or for an indefinite period. This election, which is an option for the taxpayer, applies to only one property at a time.

Although taxpayers normally have only three years to file an amended return, qualifying taxpayers who sold a residence before 2001 have until November 10, 2004, to amend their returns for this purpose. Taxpayers amending a return to use this provision should put “Military Family Tax Relief Act” in red in the top margin of Form 1040X.

Combat Zone Extensions Expanded to Contingency Operations
The various extensions granted to combat zone participants to file returns or pay taxes will also apply to those serving in Contingency Operations, as designated by the Secretary of Defense. This is effective for any acts whose deadline has not expired before November 11, 2003.

Dependent Care Assistance Program
For tax years after 2002, dependent care assistance programs for military personnel are excludable from income.

Military Academy Attendees
For tax years after 2002, the ten percent tax on payments from a Qualified Tuition Program or Coverdell Education Savings Account that are not used for educational expenses does not apply to attendees of the U.S. Military, Naval, Air Force, Coast Guard or Merchant Marine Academies, to the extent the payments do not exceed the costs of advanced education.
(IRS Tax Tip 2004-40, Feb. 27, 2004)

TaxBrain wants to honor those in military who protect our country. Click Here and get a 20% Military Discount on your efile now!