Ask Kim
Two New Money Rules for Military Families
Benefit from the new GI Bill and the home-buyer credits.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
February 4, 2010
I get a lot of questions from members of the military about their unique financial issues and benefits (and I’m particularly interested in the topic as an Army wife myself). Our Military Family Money Guide has a lot of information about the tax, insurance, retirement, mortgage and estate planning benefits and financial strategies for service members. But two big rules just changed in the past few months that can make a big difference for military families.
Huge help with kids’ college costs. The new GI Bill, which took effect on August 1, 2009, provides a big boost to military families who are saving for their kids’ college education: Longtime service members can now transfer their GI Bill benefits to their spouse and children. To qualify, you must be on active duty or selected reserve, have served at least six years in the armed forces, and agree to serve four more years (the rules are slightly different if you are eligible for military retirement between August 1, 2009, and August 1, 2013).
Spouses may use the transferred benefits right away; children must wait until you’ve served at least ten years. Service members and veterans (and spouses) must use the benefits within 15 years after leaving the military. Children have more than 15 years but must use the benefits by age 26.
Your spouse and children qualify for the same benefits that you would receive: The GI Bill pays up to the full cost of in-state tuition and fees at the most expensive public college in the state where the student is attending school (you’ll be covered only for the actual cost if you attend a school less expensive than the maxium). The bill provides benefits for up to 36 months, which should be enough to cover a four-year undergraduate program at a college with a nine-month academic year. The program also provides a stipend for housing and books.
The GI Bill benefits may not cover the entire cost of attending a private college, going to graduate school or paying out-of-state tuition at a public college. But about 1,200 colleges have signed up for the Yellow Ribbon program to cover a large portion of the extra expenses. Your spouse or children who are eligible for your GI Bill benefits are also eligible for the Yellow Ribbon program. For more information about the GI Bill, including a list of schools participating in the Yellow Ribbon program, see www.gibill.va.gov.
If you’ve already served for six years and would like to transfer your benefits to your kids, apply for the transfer as soon as possible rather than waiting until your children are closer to college age so the clock can start ticking on the extra four years of service. The Department of Defense is handling the GI Bill transfer applications; see www.defense.gov/gibill for more information about transferring benefits. Also see Now the GI Bill Is for Families, Too and A Better GI Bill.
Extended deadlines for the home-buyer credits. Members of the military who serve outside the U.S. for at least 90 days between December 31, 2008, and May 1, 2010, have an extra year to buy a home and qualify for the $8,000 first-time home-buyer credit or the $6,500 credit for longtime homeowners who buy a new home. Instead of having to enter a binding contract to buy a principal residence by April 30, 2010, and close on the house by June 30, 2010 -- which is the rule for everyone else -- service members have until April 30, 2011, to sign a contract and until June 30, 2011, to close on the sale.
This extension also applies to members of the Foreign Service and employees of the intelligence community who are serving on official extended duty outside the U.S. In both cases, only one spouse must be serving on official extended duty to qualify for the extension.
Also, most people who sell or cease to use their home as their principal residence during the first 36 months after purchase would be required to repay the credit. But there’s an exception for members of the military, Foreign Service and intelligence community. They are not required to repay the tax credit if they sell their home or stop using it as their principal residence after December 31, 2008, because they received government orders for extended duty (of 90 days or longer or for an indefinite period) at least 50 miles away from their principal residence (whether inside or outside the U.S.) or are residing under government orders in government quarters.
For more information about the special home-buyer credit rules for members of the military, see the IRS’s fact sheet and the IRS Instructions for Form 5405. For general information about the home-buyer credits, see FAQs on the New Home Buyer Credits.
Topics:
- Comments
- RSS
Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy
Reader Comments (8)
Posted by: Sheila at 02/04/2010 09:29:08 PM
I am totally confused about what to claim as educational expenses on my return. My 1098T has only 2 entries: Box 2-1772.00 and Box 5 - 2564.00 but the statement I got from my acct. at school lists the following: SBA UG RES TUITION 1830.00 DGAP DEGREE APPLICATION FEE 20.00 HIGHERONE TITLE IV TRANSFER 4736.08 TOTAL CHARGES 6588.08 FEDERAL PELL GRANT 1577.00 SUB STAFFORD LOAN FFELP 1797.32 UNSUB STAFFORD LOAN FFELP 2216.76 ORSNG OR OPPORTUNITY GRANT 987.00 So any advice on what my qualified expenses are? I'm lost. Thanks for any help you can give me.
Posted by: Billie Shively at 02/06/2010 09:34:07 AM
Can anyone tell me when I should get mine check from the American Of Oppertuinty for beening a full time student I was told when I filied mine tax that it would be a serperat check.
Posted by: bob l at 02/08/2010 12:35:21 PM
Finally something positive for our GIs. The last administration talked about how they were for our vets. This administration is starting to do something about it.
Posted by: Jim Rodriguez at 02/08/2010 02:46:33 PM
My son is 17 years old, a senior in high school, can I still claim him on our taxes as a dependent?
Posted by: CVB at 02/09/2010 03:10:07 PM
For bob 1----Obama was NOT president when this went into effect...BUSH was... "In 2008, the GI BIll was updated once again. The new law gives veterans with active duty service on, or after, Sept. 11 2001, enhanced educational benefits that cover more educational expenses, provide a living allowance, money for books and the ability to transfer unused educational benefits to spouses or children.'
Posted by: Military Spoue at 02/10/2010 09:36:52 AM
This is for CVB first of all I don't care who was in office the whole GI Bill thing still sucks to some degree. I am a military spouse and I cant use my husbands GI Bill even though he is the one that put the money into it in the first place. The reason why I cant use it is because I am not willing to let him do an additional two years in the military after already serving 20 yrs. I believe they should let me or our kids use it considering he has already been on 5-6 deployments in Iraq and Afghanistan and has already given our country 20 yrs of great service but no that's not good enough they want him to do another 2 yrs just to transfer the GI BIll to me when he has already done way more than the GI Bill is worth and that is serving our country for 20 yrs and being proud of it. It is the small print that civilians don't know about the military.
Posted by: cvb at 02/22/2010 05:10:21 PM
To Military Spouse--I understand your frustration. The military is a gigantic bureaucracy with all the inadequacies of bureaucracies. I'm having a hard time understanding why so many people want a similar bureaucratic structure managing our health care. If you will notice, my comment was directed to the inaccuracy in the post by bob1. The changes to which he refers were put in place by the previous administration. It takes a while for all the pieces to fall into place. I've noticed that frequently the wrong group gets credit.
Posted by: heybob at 03/24/2010 02:49:51 PM
hey bob I this bill was introduced before obama's time.....thank bush instead