If you are active duty military, no one needs to tell you how stressful the military lifestyle can be: frequent moves, disrupted schooling for your kids, frequent separations from loved ones and the fear of not coming home.
Financial stress can also go hand-in-hand with military service, so in November of 2003, the Military Family Tax Relief Act (MFTRA) was signed into law. MFTRA offers tax breaks to active duty personnel and their families. If this is your first year as active duty military, take a few minutes to read up on the basics of this tax law to see how it can help you and your family.
Overview
The MFTRA was designed to ease some of the restrictions on tax credits for which military personnel either weren’t eligible or from which they were partially excluded.
The IRS extended the three-year window for filing an amended tax return so you could claim the credits retroactively if you qualify to do so.
Principal Residence
Typically, you would have to live in your home for at least five years in order to reap the benefits of the taxable gain exclusion; tough to do when you must pull up stakes and move more often as required in the military.
The MFTRA allows you to claim a 10-year exemption from the 5-year rule. To be eligible, you must receive orders to live in government (base) housing for at least 90 days, and these temporary quarters must be at least 50 miles away from your previous home.
Death Benefits
Previously, family members of active service personnel killed in the line of duty received $6,000 in death benefits, half of which were exempt from federal taxes.
The MFTRA allows for a $12,000 death benefit, all of it tax-exempt.
National Guard Travel Expenses
If you are active in the National Guard and are required to travel at least 100 miles from home for Guard activities, a portion of your expenses could be deducted from your taxes.
Eligible expenses include non-reimbursable travel, food and lodging expenditures. The amount you can claim is subject to the same per diem limits that apply to all federal employees.
You can calculate your total expenses using Form 2106, and then transferring that amount to line 1 of your 1040 Federal Tax Return as an adjustment to income.
If this is the first year of military service for either you or your spouse, be sure to consult with a tax pro who is familiar with tax codes as they apply to active duty personnel. You may be eligible for tax savings under the MFTRA.
If the thought of interpreting tax code and filing additional forms leaves you cold, we have qualified tax advisors on staff to help you. You’ll get clear answers to your questions and solid advice on your unique tax scenario. Just click the white “Start Chat” button at the top of our webpage, or give us a call. We’re here to help.