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IRA Contributions for Military Personnel |
Nontaxable combat pay is considered compensation
Members of the military serving in Iraq, Afghanistan, and other combat zone localities can now put money into an IRA, even if they received tax-free combat pay. Under the Heroes Earned Retirement Opportunities (HERO) Act,
military personnel can now count tax-free combat pay when determining
whether they qualify to contribute to either a Roth or traditional IRA.
Before this change, members of the military whose earnings came
entirety from tax-free combat pay were generally barred from using IRAs
to save for retirement.
In addition, the HERO Act allows military personnel who received
tax-free combat pay in either 2004 or 2005 to go back and make IRA
contributions for those years. Eligible military members will have
extra time, until May 28, 2009, to make these special back-year
contributions.
For those under the age of 50, the IRA contribution limit was $3,000
for 2004 and $4,000 for 2005. For those age 50 and over, the limit was
$3,500 for 2004 and $4,500 for 2005. The IRA contribution limit for
2006 is $4,000 and $5,000 for those taxpayers age 50 and over.
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