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House OKs tax relief for soldiers, veterans

/ Source: The Associated Press

Military personnel would receive tax benefits and access to low-interest home loans under legislation winning unanimous approval Tuesday in the House.

The $2.3 billion bill, passed 410-0, is one of several expected to be taken up by the House this week to recognize veterans before Veterans Day. The House on Monday approved legislation to protect the credit ratings of service members deployed overseas, and Congress is to consider an annual spending bill that significantly boosts funds for veterans programs.

The bills also need Senate consideration.

The legislation makes permanent current law to include combat pay as earned income for purposes of the Earned Income Tax Credit, which refunds payroll and income taxes to low-income people. It also makes permanent Internal Revenue Service provisions to permit active duty reservists to make penalty-free withdrawals from retirement plans and to allow employers to make contributions to retirement plans on behalf of an employee killed or disabled in combat.

Recipients of military death benefit gratuities are allowed to roll over those amounts, tax-free, to Roth IRAs or education savings accounts. Thousands of veterans would be eligible for low-interest loans to become homeowners.

The breaks also extend to other public servants such as Peace Corps and AmeriCorps volunteers, emergency responders and volunteer firefighters. The bill states that reimbursements for expenses incurred by volunteer firefighters in the line of duty are not taxable.