Amata hails House passage of HERO Act to give troops additional tax benefits
May 12, 2006

Reprinted from Samoa News
May 12, 2006

Aumua Amata reported that the U.S. House passed on Tuesday the Heroes Earned Retired Opportunities Act. "This is good news for our Samoans serving in the Armed Forces," she said.

Known as The HERO Act, the bill treats tax-free combat pay as taxable compensation to allow our soldiers to make annual IRA contributions. The provision is effective for contributions made after December 31, 2003 providing our troops with up to $70 million in tax benefits over the next 10 years.

The bill amends the Internal Revenue Code to allow members of the Armed Forces to include their combat zone compensation (otherwise excludable from gross income) in their calculation of earned income for purposes of determining their allowable income tax deduction for contributions to retirement savings plans. The legislation is retroactive to taxable years beginning after December 31, 2003.

"By way of background, current law may prohibit troops from saving in an IRA," explained Amata. "Generally, contributions to an Individual Retirement Account (IRA) are limited to the lesser of $4,000 (in 2006) or the individual's taxable compensation."

Amata added, "Combat pay is tax-free. As a result, members of the military who receive combat pay as their only source of compensation are not allowed to contribute to an IRA (because their taxable compensation is zero). This current-law rule may limit or prohibit IRA savings for men and women in uniform."

"I commend the House for passing the HERO Act because it treats tax-free combat pay as taxable compensation for the purpose of making annual IRA contributions and that is an important benefit for our troops," she said.

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