The IRS yesterday (in IR-2006-129) reminded members of the military serving in Iraq, Afghanistan and other combat zones of the recently liberalized IRA contribution rules. Under the Heroes Earned Retirement Opportunities (HERO) Act, signed into law on Memorial Day, 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 entirely from tax-free combat pay were barred from using IRAs to save for retirement.
In addition, military personnel have until May 28, 2009 to go back and make IRA contributions for 2004 and 2005. For those under the age of 50, the IRA contribution limit was $3,000 for 2004 and $4,000 for 2005; for those 50 and over, the limit was $3,500 for 2004 and $4,500 for 2005. For 2006, the IRA contribution limit for 2006 is $4,000 for those under age 50 and $5,000 for those 50 and over.
For more on the special tax rules applicable to military personnel, see:
