Stimulus act adds new tax benefits for troops

Erik Slavin writes in "Stars and Stripes":

"The American Reinvestment and Recovery Act of 2009, signed by President Barack Obama last month, includes new tax breaks that will benefit some servicemembers, financial professionals at bases in Japan said last week.

Along with the new deductions, there are several old deductions that benefit military members, especially if they itemize.

One of the biggest tax provisions in the Recovery Act economic stimulus plan allows anyone who purchases a home between Jan. 1 and Nov. 30 to take an $8,000 tax credit. The home has to be where you plan to live, said Jim McDaniel, an accredited financial counselor at the Yokota Air Base Airman and Family Readiness Center. ..."
FULL ARTICLE: http://www.stripes.com/article.asp?section=104&article=61200

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For more information on ARRA's impact on the warrior community, see:

• American Reinvestment and Recovery Act of 2009 (large PDF)
• Department of Defense
  Overview of the American Recovery and Reinvestment Act of 2009 (Recovery Act) (note periodic reports, near bottom of page)
• Department of Veterans Affairs Overview of the American Recovery and Reinvestment Act of 2009 (Recovery Act) (that page is basically a stub, needing more information IMO)
• White House invites your comments on ARRA here

Recouping Taxes Paid on Disability Severance Pay

A veteran posting as "Dorothy" wrote on the "Non-governmental U.S. Veteran Information" website:

"Many medically discharged vets, including some good friends of mine, don't know they are entitled to get the taxes back if they get a VA rating. The ones who do know they are entitled (like I did) don't know how to go about doing it. If I can spare anyone what I went through trying to figure it out, its worth it."

See for yourself at: IRS publications 17 (Your Federal Income Tax) at page 52, and & IRS publications 525 (Taxable & Non-taxable Income) at page 17 both say that those who receive a lump-sum disability severance payment and are later awarded VA disability benefits can exclude 100% of the severance benefit from income. Unfortunately, neither publication says how and, as an added complication, it can happen that VA disability ratings are awarded after taxes on the lump-sum are already paid.

To help sort it all out, the Presidio of Monterey Staff Judge Advocate put an information paper online. Its three pages of instructions are followed by 4 handy sample letters.

"Dorothy" worked through the process and posted a step-by-step procedure here: http://www.usvetinfo.com/meddischarge.htm

I, personally, have not worked through the process but it looks worth taking advantage of the prior experience of those who have. Read more on USVI: http://www.usvetinfo.com/meddischarge.htm

And thanks for the head's up from the blog Military & Veterans: Politics for the deserving