Tax relief for victims of terroristic or military action. The Victims of Terrorism Tax Relief Act of 2001 provides tax relief to those injured or killed in the April 19, 1995 (Oklahoma City), September 11, 2001, or certain anthrax attacks. The Act also provides relief to survivors of those killed in the attacks and others who were affected by those attacks. It includes:

• Forgiveness of federal tax liability for those who died as a result of the attacks.
• A reduction in the estate tax of those who died as a result of the attacks.
• Tax-free treatment of qualified disaster relief payments, certain disability income, certain death benefits, and certain cancellation of indebtedness.

For more information on these relief provisions and methods for claiming tax refunds, see Publication 3920.

Afghanistan designated a combat zone. By Executive Order No. 13239, Afghanistan (and airspace above) is designated as a combat zone beginning September 19, 2001.

Third Party Designee. Beginning with your 2001 tax return, you can check the Yes box in the Third Party Designee area of your return to authorize the IRS to discuss your return with a friend, family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your tax return. It also allows your designee to perform certain actions. See the income tax package for details.

Parent of a kidnapped child. The parent of a child who is presumed by law enforcement authorities to have been kidnapped by someone who is not a family member may be able to take that child into account in determining his or her eligibility for the following:

• Head of household or qualifying widow(er) with dependent child filing status.
• Exemption for dependents.
• Child tax credit.
• Earned income credit.

For more information, see Publication 501.

Rate reduction credit. If you did not receive the maximum advance payment in 2001, you may qualify for the rate reduction credit. You can use the worksheet in your form instructions to determine whether you can claim the credit.

Standard mileage rate. The standard mileage rate for the cost of operating your car increased to 34.5 cents a mile for all business miles driven.

Earned income credit. The maximum amount of income you can earn and still get the earned income credit has increased. You may be able to take the credit if you earned less than $32,121 if you have two or more qualifying children; $28,281 if you have one qualifying child; and $10,710 if you do not have any qualifying children. See Earned Income Credit, later.

Exemption amount increased. You are allowed a $2,900 deduction for each exemption to which you are entitled.

Child tax credit. The maximum child tax credit you can claim for each qualifying child is increased to $600. The qualifications for claiming the additional child tax credit have been changed to include a qualifying individual with fewer than 3 children. See Child Tax Credit, later.

Education IRAs renamed Coverdell ESAs. Education individual retirement accounts (education IRAs) are now Coverdell education savings accounts (Coverdell ESAs). These Coverdell ESAs are not individual retirement arrangements. For information on Coverdell ESAs, see Publication 970.

Interest on student loans. You may be able to deduct as an adjustment to income interest paid on a qualified student loan. The maximum deduction is increased to $2,500. For more information, see Publication 970.

Payments to Holocaust victims. Restitution payments received after 1999 (and certain interest earned on the payments) are not taxable and do not affect the taxability of certain benefits, such as social security benefits. You may have to file Form 1040X if you included these amounts in income on your 2000 tax return or if you used the payments in any computation affecting your tax liability.

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