Publication 3
Introductory Material

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Servicemembers Civil Relief Act. As a member of the Armed Forces, you may be able to defer (delay) payment of income tax that becomes due before or during your military service for up to 180 days after termination or release from service. For more information, see Not in a combat zone under Extension of Deadline.

Military Family Tax Relief Act of 2003. The Military Family Tax Relief Act of 2003 provides the following tax relief for members of the Armed Forces and their families.

Lower income tax rates. For 2003, most tax rates have been reduced. The lower rates are reflected in the Tax Table and Tax Rate Schedules in your tax forms instructions.

Child tax credit. For 2003, the maximum child tax credit has been increased to $1,000 for each qualifying child. But you must reduce your credit by any advance payment you received in 2003. For more information, see Child Tax Credit under Credits, later.

Tax rates for capital gains and dividends. For capital gains after May 5, 2003, the 10% maximum capital gain rate is reduced to 5% and the 20% rate is reduced to 15%. For more information, see Capital Gain Tax Rates in Publication 550, Investment Income and Expenses. For 2003, qualified dividend income is taxed at the new capital gain rates. See Qualified Dividend Income in Publication 550.

Standard mileage rate. The standard mileage rate for the cost of operating your car decreased to 36 cents a mile for all business miles driven. The standard mileage rate for operating your car to get medical care or to move decreased to 12 cents a mile.

Earned income credit. The maximum amount of income you can earn and still claim the earned income credit has increased. You may be able to take the credit if you earned less than $33,692 ($34,692 for married filing jointly) if you have two or more qualifying children; $29,666 ($30,666 for married filing jointly) if you have one qualifying child; and, $11,230 ($12,230 for married filing jointly) if you do not have any qualifying children. See Earned Income Credit, later.

Exemption amount. You are allowed a $3,050 deduction for each exemption to which you are entitled.

Lifetime learning credit. The maximum lifetime learning credit has increased to $2,000 (20% of up to $10,000 of qualified tuition and related expenses). For details, see Publication 970.

Important Reminders

Third party designee. 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.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1–800–THE–LOST (1–800–843–5678) if you recognize a child.

Introduction

This publication covers the special tax situations of active members of the U.S. Armed Forces. It does not cover military pensions or veterans' benefits or give the basic tax rules that apply to all taxpayers. For information on military pensions or veterans' benefits, see Publication 525, Taxable and Nontaxable Income. If you need the basic tax rules or information on another subject not covered here, you can check our other free publications. See Publication 910, IRS Guide to Free Tax Services, for a list and descriptions of the different tax publications.

For federal tax purposes, the U.S. Armed Forces includes commissioned officers, warrant officers, and enlisted personnel in all regular and reserve units under control of the Secretaries of the Defense, Army, Navy, and Air Force. The U.S. Armed Forces also includes the Coast Guard. It does not include members of the U.S. Merchant Marine or the American Red Cross.

Members serving in an area designated or treated as a combat zone are granted special tax benefits. In the event an area ceases to be a combat zone (by Presidential Executive Order or by statute), the IRS will do its best to notify you. Many of the relief provisions will end at that time.

Members serving in a qualified hazardous duty area designated by statute are afforded the same benefits as members serving in a combat zone designated by Executive Order.

Useful Items - You may want to see:

See How To Get Tax Help, near the end of this publication, for information about getting IRS publications and forms.

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