IRA Contributions
for Military Personnel
Nontaxable combat pay is eligible 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 entirely 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.
