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Taxes: Military Family Tax Relief Act of 2003

Military members are given numerous tax breaks. One such benefit is the Military Family Tax Relief Act of 2003. On November 11, 2003, President George W. Bush signed the act (H.R. 3365), providing specified tax relief to members of the Armed Forces. A summary of the legislation that directly impacts military tax returns is provided.

Increase in military death gratuity benefit

  • Military death gratuity benefit is increased from $6,000 to $12,000
  • Amount of military death gratuity benefit that is excludable from income is increased from $3,000 to $12,000
  • Effective with respect to deaths occurring after September 10, 2001

Extension of five-year period for purposes of excluding gain from the sale of a principal residence

  • When determining eligibility to exclude capital gain upon the sale of a principal residence, there is a general requirement that the homeowner must have lived in the residence for at least two of the previous five years
  • Members of the uniformed services and foreign service personnel may elect to suspend the running of the above 2-out-of-5-year requirement during any period of qualified official extended duty up to a maximum of ten years
  • Effective for sales made after May 6, 1997
  • A minimum one year window of time beginning with the date of enactment is created for purposes of filing a claim for refund or credit which might otherwise be barred

Exclusion of amounts received under Department of Defense Homeowners Assistance Program

  • Qualified amounts received by military homeowners under the Department of Defense Homeowners Assistance Program are excluded from income
  • Effective for payments made after the date of enactment

Exclusion of amounts received for military dependent care assistance

  • Clarification is made that dependent care assistance provided under a military dependent care assistance program is excluded from income
  • Effective for tax years beginning after December 31, 2002

Deduction for overnight travel expenses of National Guard and Military Reserve members

  • A new above-the-line deduction is created for qualifying travel expenses of National Guard and Military Reserve members
  • The expenses must relate to overnight travel more than 100 miles away from home, and include meal, transportation, and lodging expenses (subject to limitation)
  • Effective for amounts paid or incurred in taxable years beginning after December 31, 2002

Combat zone filing rules are extended to contingency operations

  • Existing extensions for filing tax returns and making tax payments that apply to individuals serving in combat zones are extended to individuals serving in “contingency operations”
  • Contingency operations are operations designated by the Secretary of Defense in which members of the Armed Forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing military force, or result in the call or order to (or retention of) active duty of members of the uniformed services during a war or national emergency declared by the President or Congress
  • Effective for any period for performing an act which has not expired before the date of enactment

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