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IRS Tax Exclusion for Firefighters and Emergency Responders:

The MSVFA wants to remind all volunteer firefighters about the IRS tax deduction. Don't forget the Exclusion for Firefighters and Emergency Responders you are entitled to it!

http://www.irs.gov/govt/fslg/article/0,,id=184221,00.html

The Mortgage Forgiveness Debt Relief Act of 2007 contained an important provision affecting firefighters and other emergency responders who receive local tax benefits or other benefits for volunteer services. This provision was further clarified by the Heroes Earnings Assistance and Relief Tax Act of 2008.

New Benefits

The new law provides that volunteer firefighters and emergency responders may exclude certain benefits from income provided on account of the performance of volunteer services.

Reduction of Taxes

Any reductions or abatement of state or local property or other taxes provided to volunteers in recognition of work performed constitutes compensation and, under prior law, is fully taxable under Internal Revenue Code section 61. Beginning January 1, 2008, however, volunteers who perform services for a qualified volunteer emergency response organization may exclude the value of property tax abatements from Federal gross income and social security and Medicare (FICA) tax. No additional withholding is required on the value of these benefits.

Property taxes are generally deductible as itemized deductions, but any amounts excluded under these provisions may not be included on Schedule A as deductible taxes.

Other Benefits

In general, reimbursements for expenses are included in the income of the volunteer unless they are made under the provisions of an accountable plan. An accountable plan requires that an employee timely account for all reimbursements and return any excess amounts. See Publication 15, Employer’s Tax Guide.

The new law provides that the value of other benefits that qualifying volunteers receive (such as reimbursements for expenses or equipment allowances), up to $30 for each month of service during a calendar year, may be excluded from income for income tax, social security and Medicare purposes. The exclusion should be applied after taking into account amounts excludable as reimbursements under an accountable plan; the exclusion may be taken to amounts not paid under an accountable plan. If the volunteer performs services in each month of the year, the maximum exclusion for these benefits is 12 x $30, or a maximum of $360 per year for each employee. The qualified organization making these payments is not required to withhold income, social security or Medicare taxes on these amounts; withholding on each individual for income, social security and Medicare tax should begin for each month after the first $30 of excludable benefits has been received.

Who Is Eligible for the Exclusion?

Individuals who perform services for qualified volunteer emergency response organizations are eligible for these benefits. A “qualified volunteer emergency response organization” for this purpose is an entity that is organized and operated to provide firefighting or emergency medical services for persons in the state or political subdivision. The $30 per month exclusion applies to amounts not otherwise excludable as reimbursements received under an accountable plan. For more information on accountable plans, see section 5 of Publication 15-B.

The exclusion for both the tax abatements and the other qualified benefits is available for 2008, 2009, and 2010.

H.R. 3648 [110th]: Mortgage Forgiveness Debt Relief Act of 2007   Signed by President  Dec 20, 2007 and Became Public Law No: 110-142

SEC. 5. EXCLUSION FROM INCOME FOR BENEFITS PROVIDED TO VOLUNTEER FIREFIGHTERS AND EMERGENCY MEDICAL RESPONDERS.

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