Heroes Earned Retirement Opportunities (HERO) Act:
On May 29, 2006 President Bush signed into law the Heroes Earned Retirement Opportunities (HERO) Act. The HERO Act allows members of the Armed Forces serving in a combat zone to include nontaxable combat pay as compensation for purposes of determining traditional IRA or Roth IRA contribution amounts.
Prior to this act, because combat pay is nontaxable and excluded from gross income, a serviceman or servicewoman with only combat pay was unable to make an IRA contribution.
Additional time to make traditional IRA or Roth IRA contributions:
Generally, traditional IRA or Roth IRA contributions are due by the tax filing deadline (April 15, 2013 for the 2012 tax season), not including extensions. However, military members and their spouses may qualify for a deadline extension of up to 180 days after the last day served in a combat zone, hazardous duty area, or certain other deployments, plus the number of days that were left to make the IRA contribution at the time service in the combat zone began. The extension doesn’t just apply to traditional IRA or Roth IRA contributions, but also to filing tax returns, paying taxes, and claiming a tax refund.
Heroes Earnings Assistance and Relief Tax Act (HEART) Act:
On June 17, 2008 President Bush signed into law the Heroes Earnings Assistance and Relief Tax (HEART) Act. One of the major provisions of the HEART Act relates to the ability to roll over Servicemembers’ Group Life Insurance (SGLI) payments to a Roth IRA or a Coverdell ESA.
The Act permits an individual who receives a military death gratuity or SGLI to contribute the funds to a Roth IRA and/or one or more Coverdell education savings accounts. In addition, the contributions would be treated as rollover contributions and not subject to normal income or contribution limits. The contribution must be made within one year from the date the taxpayer receives the military death gratuity or SGLI payment. This provision is generally effective for payments made on accounts of deaths from injuries occurring on or after June 17, 2008.
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Reprinted with permission- Allianz