Tax Tips & Calculators

The HEROES Earnings Assistance & Relief Tax Act of 2008 (H.R. 6081) is also known as the "2008 Heroes Act," "HEART," and the military relief bill. This bill amends the Internal Revenue Code of 1986 to provide benefits and incentives for military personnel. Here's a summary of the major provisions.

Combat Pay Election Made Permanent

The election to treat combat pay as earned income for purposes of determining Earned Income Credit is made permanent. The election had expired Dec. 31, 2007.

Extension of Statute of Limitations for Retroactive Disability Determinations

The usual 3-year statute of limitations for claiming a credit or refund for taxes paid on military retirement benefits that were later excludable as disability pay is extended if the claim is filed within 1 year after the disability determination is made by the Department of Veterans Affairs.

Economic Stimulus Payments

A special provision allows military families to receive economic stimulus payments without regard to the identification number (social security number) requirement if at least 1 spouse is a member of the armed forces at any time during the year and all other qualifications are met. The exception applies to the taxpayer, spouse and all qualifying children. The provision applies as if it were included in the Economic Stimulus Act.

Contributions of Military Death Gratuities to Roth IRAs and Coverdell ESAs

Military death gratuities paid to survivors may be rolled over to a Roth IRA or to a Coverdell ESA without regard to contribution limitations.

Qualified Reservist Distributions

Reservists called to active duty may take distributions from IRAs and employer plans, regardless of age, without incurring the 10% early-withdrawal penalty. The period the individual is called or ordered to active duty must be for a period of more than 179 days or for an indefinite period, and the distribution must be taken on or before the last date of the active duty period.

Unused Health Flexible Spending Account (FSA) Benefits

Reservists called to active duty may withdraw unused funds from a health FSA if the individual is called or ordered to active duty for a period of more than 179 days or for an indefinite period.