4 Things Military Members Need to Know About the American Taxpayer Relief Act
The American Taxpayer Relief Act (ATRA) passed by Congress at the beginning of 2013 allowed the country to avoid the dreaded fiscal cliff. However, this complex piece of legislation is one many taxpayers don’t completely understand. Before you give yourself a headache trying to decipher the new tax code on your own, take a look at this easy-to-understand breakdown of how the ATRA will impact members of the military and their families.
1. Taxes & Credits
The main provision of this legislation retains the reduced income tax rates signed into law in 2001 and 2003 for military families with a combined income of $450,000 or less. ATRA also continues the marriage penalty relief that gradually increases the basic standard deduction for couples filing a joint return in 2013. The bill extends the child tax credit, some provisions of the Earned Income Tax credit that provided assistance for many military families after 2001, an education tax credit, and the American Opportunity Tax Credit (AOTC) through 2017.
2. Social Security
The 2% Social Security payroll tax reduction was not continued. Military personnel will see a reduction in take-home pay each pay period because of the 6.2% payroll tax withholding for the 2013 income tax year. A military loan from Just Military loans can help military members and their families supplement their reduced monthly income if needed.
Educational armed service loans may also be more attractive for military families because of some educational incentives included in the AOTC legislation. The student loan interest deduction and Coverdell education savings accounts are extended permanently. ATRA continues the permanent extension of employer-provided education assistance up to $5,250. When military families file federal tax returns, the National Health Service Corps Scholarship Program and the Armed Forces Scholarship Program do not have to be reported as income. The ATRA extension of the AOTC until Dec. 31, 2013 is another incentive for military families to obtain military loans for education before this tax incentive expires.
Military families considering purchasing a home in the future may want to contact a qualified military lender, such as Just Military Loans, for information about military loans and the ATRA provisions pertaining to mortgages. For example, ATRA extends deductions of mortgage insurance on any home of residence of a military family that is qualified for this deduction. The bill permits a married military couple filing a joint tax return to deduct up to $2 million of mortgage cancellation debt. ATRA also extends a provision to omit the military’s basic housing allowance as a determining factor for qualification for the low-income housing tax credit program.
The ATRA may have prevented the U.S.’s swan dive off the fiscal cliff, but don’t let the meaty language of the legislation detour you from maximizing your tax benefits. If you have questions, Just Military Loans can assist in answering them or direct you to a resource that can. It’s important to understand how the ATRA impacts you and your military family so you can continue to make the most of your money.
Do you have a burning question to ask about the ATRA? Is there another way the new tax law is impacting military families? We’d love to hear your thoughts and questions.