Military Money and Finance

MILITARY TAX BREAKS
IRS Economic Stimulus Payments

"The last thing we want for our troops in Iraq or other war zones is to worry about their tax returns. We also want military troops and their families stateside to know they may qualify for the economic stimulus payment," said Linda E. Stiff, Acting Commissioner of the Internal Revenue Service.

Starting in May, 2008, the IRS will issue economic stimulus payments of up to $600 ($1,200 for married couples) plus a $300 payment for each qualifying child younger than 17. The payments are based on the previous year's income tax returns. Economic stimulus payments for individuals begin to phase out starting at $75,000 in adjusted gross income ($150,000 for married couples).

And those in the military are included in this economic stimulus payment as well.

Even military individuals and families who normally do not file a tax return because they have no filing requirement may qualify for an economic stimulus payment. You may be eligible for the minimum payment of $300 ($600 for married couples) plus the $300 for each qualifying child younger than 17.

To qualify, you must have at least $3,000 in qualifying income. Qualifying income is defined as any combination of earned income (such as wages or taxable income from self-employment), nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement.

Military personnel who normally would not file an income tax return because their 2007 income is not taxable can still file a simple Form 1040A with the IRS to receive the economic stimulus payment. As military personnel, you should report your nontaxable combat pay on Line 40b of the Form 1040A to show at least $3,000 in qualifying income. The Department of Defense lists the amount of excluded combat pay, along with the designation, "Code Q," in Box 12 of Forms W-2.

If a military person is serving in a combat zone, his or her normal tax filing requirement is extended until at least 180 days after leaving a combat zone. However, military spouses or others with a power of attorney can prepare and file a 2007 income tax return on their behalf so that the stimulus payment is received this year.

Be aware of the special tax code provisions that apply to military personnel including reservists and National Guard members serving in combat zones:

• All military pay earned by enlisted personnel or warrant officers is excluded from gross income.
• Monthly pay of up to $6,867.60 earned by commissioned military officers is excluded from gross income.
• All military pay earned by enlisted personnel hospitalized because of injuries sustained in a combat zone is excluded from gross income during the period of hospitalization.
• Commissioned military officers hospitalized because of injuries sustained in a combat zone have a monthly maximum exclusion of $6,867.60 for 2007 and a two-year limitation.
• Military personnel who miss a tax filing deadline because they are in a combat zone have 180 days after they leave that combat zone to file a tax return for their taxable income.

You can receive your economic stimulus payments faster by using direct deposit when filing your tax return. In addition, filing for your stimulus payment electronically makes for a faster tax rebate. If you're not required to file a tax return, the IRS and the Free File Alliance have a special program set up for free electronic filing and faster processing of your economic stimulus payment.

Tax rebate money in your pocket faster? That's what you in the military deserve.