The president signed the Military Family Tax Relief Act into law Nov. 12, 2003, ending MOAA’s and The Military Coalition’s long-fought battle to win relief for active duty, Guard, and Reserve members and their survivors. Four provisions of the act are worth particular mention. 

First, the gratuity paid to survivors of members killed on active duty is raised from $6,000 to $12,000 and made fully tax-free, retroactive to Sept. 11, 2001. 

Second, National Guard and Reserve members who drill at sites 100 miles or more from home will be allowed to deduct drill-related travel and lodging expenses, even if they don’t itemize their tax returns, starting in 2003. 

Third, for homeowner capital gains purposes, the new law exempts up to 10 years away from home on military orders from counting against the requirement to have lived in the house for at least two of the five years preceding sale. This provision is retroactive to cover sales after May 6, 1997. Normally there’s a three-year time limit on filing amended tax returns. But the new law provides a special one-year window (until Nov. 10, 2004) to file for qualifying members who paid capital gains on homes sold between 1997 and 2000. 

Finally, federal Homeowner Assistance Program payments to military and certain other homeowners whose home values are depressed by base closure actions will be tax-free starting in 2004. With more closures scheduled for 2005, this should save thousands of dollars for many members.