President Bush has signed a bill amending the tax code to allow servicemembers in combat zones to also contribute to Individual Retirement Accounts, the White House announced Wednesday.
The Heroes Earned Retirement Opportunities Act, which Bush signed on May 29, means that troops can both contribute to IRAs and take advantage of the tax-free status of their pay. Until this year, the federal tax code prohibited servicemembers from doing both at the same time.
The HERO Act is also retroactive to tax year 2004, officials said. Any servicemembers who did not make IRA contributions during 2004 or 2005 while also eligible for the combat zone tax exclusion can now do so. Further, the retroactive filings can be made until May 28, 2009 — three years after the date of enactment.
Military compensation earned by servicemembers while in combat zones is excluded from federal income tax.
For enlisted troops, all pay and entitlements are tax-free. Officers can exclude from taxes up to the maximum amount of enlisted pay, plus imminent danger pay for the months they are in a combat zone.
For more information on making retroactive IRA contributions, see unit finance advisers or the Internal Revenue Web site at: www.irs.gov.