Military Family Tax Relief Act

On Nov. 11, 2003, the Military Family Tax Relief Act of 2003 was signed into law. Among its provisions are these tax breaks related to military personnel:

Death benefits

The death gratuity paid to survivors of deceased Armed Forces members rises to $12,000 and is not taxable (was $6,000, with $3,000 tax-free). Effective for deaths occurring after 9/10/2001. Taxpayers amending a return to use this provision should put "Military Family Tax Relief Act" in red in the top margin of Form 1040X.

Sale of principal residence

A taxpayer on qualified official extended duty in the U.S. Armed Services or the Foreign Service 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. Retroactive for home sales after May 6, 1997.

Deduction for overnight travel expenses of National Guard and Reserve members

Reservists who stay overnight more than 100 miles away from home while in service (e.g., for a drill or meeting) may deduct un-reimbursed travel expenses (transportation, meals and lodging) as an above-the-line deduction.

Dept. of Defense Homeowners Assistance Program

Payments made after Nov. 11, 2003, under this program to offset the adverse effects on housing values of military base realignments or closures will be excludable from income as a fringe benefit.

Dependent care assistance programs

Clarifies that dependent care assistance programs for military personnel are excludable benefits. Effective for tax years after 2002.

Military academy attendees

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. Effective for tax years after 2002.