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Posted: 10/4/2004 11:50:03 PM EDT

October 04, 2004

Bush signs tax bill for low-income troops in combat zones

By Rick Maze
Times staff writer

A bill promising tax breaks for low-income troops serving in a combat zone was signed into law Monday by President Bush.

The Working Families Tax Relief Act includes two combat-related provisions making it easier for troops and their families to qualify for the Earned Income Tax Credit and the child tax credit.

Bush signed the bill during a stop in Iowa, making this the fourth tax-cutting measure he has signed in his four years in office.

In both cases, military pay that is tax-exempt due to service in a combat zone can be counted as income when trying to qualify for the Earned Income Tax Credit, worth up to $4,200 a year, and the child tax credit, worth up to $1,000 a year.

Previously, pay excluded from taxation could not be counted as income, preventing many service members — especially single parents and junior service members whose spouses have little or no additional income — from qualifying for the tax breaks available to other people.

Congress initially resisted changing the law, with congressional leaders arguing that service members didn’t deserve a tax credit if they weren’t paying taxes in the first place. But they relented under pressure from military advocacy groups and congressional Democrats who countered that service members shouldn’t be denied a tax break just because they were ordered into a combat zone.

The new income-counting rules will apply for tax years 2004 and 2005.

In addition to the two military provisions, which cost about $200 million over 10 years, the $131.4 billion tax bill also extends through 2010 the child tax credit, relief from the marriage penalty and a 10 percent tax bracket for low-income people.
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