Senator Reid: Reid Cosponsors Bill To Support Troops, Veterans, And Their Families

Tax relief for home buying, combat pay, retirement savings

June 14, 2007 -- Washington, DC — U.S. Senator Harry Reid of Nevada is cosponsoring legislation that would provide tax relief to members of the military, National Guard, Reserves and their families and employers.

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“People who serve in the armed forces are willing to put their lives on the line to protect our country and we should make sure that they are properly taken care of,” said Reid. “This is good legislation that will help deliver significant tax relief to members of our military and their families here at home.”

The Defenders of Freedom Tax Relief Act seeks to:

* Continue to allow veterans to be eligible for the mortgage revenue bond program irrespective of that program’s requirement that it be limited to first-time homebuyers. This provision currently is scheduled to expire at the end of 2007.
* Continue to allow service members to elect to count combat pay as income for purposes of qualifying for the Earned Income Tax Credit. This provision currently is scheduled to expire at the end of 2007.
* Extend the time that military retirees can file amended returns to obtain refunds of tax on non-taxable VA benefits that are awarded retroactively.
* Treat differential pay received by National Guardsmen and Reservists from their employers to help reduce the gap between their military pay and their civilian pay as wages for purposes to ease tax reporting for both the employer and employee.
* Provide small employers an income tax credit to encourage them to provide members of the Guard and Reserves differential pay to help reduce the gap between their military pay and their civilian pay.
* Continue to allow reservists called to active duty to receive distributions from a qualified retirement plan without having to pay the 10% penalty for early withdrawals and provide a 2-year period for the reservist to re-contribute such amounts to an IRA. This provision currently is scheduled to expire at the end of 2007.
* Allow survivors of soldiers killed in the line of duty to contribute gratuity payments received from the Defense Department to a Roth IRA account.
* Continue to allow intelligence officers to suspend the time period for qualifying for the tax-free sale of a home when stationed overseas. This provision currently is scheduled to expire at the end of 2007.
* Codify the tax-free treatment of payments made by States to members of the military as thanks for their war service.

Source: Senator Harry Reid