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IRS Tax Exclusion for Firefighters and Emergency Responders:

Internal Revenue Service Office of Federal, State and Local Governments
www.irs.gov/govt
FSLG Newsletter – July 2008
Internal Revenue Service

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IRS Publication 15-B 15-B

Employer’s Tax Guide to Fringe Benefits For use in 2010

Volunteer Firefighter and Emergency Medical Responder Benefits .. page 20

Volunteer Firefighter and Emergency Medical Responder Benefits
An exclusion from gross income is available to volunteer firefighters and emergency medical responders who are members of a qualified volunteer emergency response organization.

After 2007, gross income does not include:

Rebates or reductions of property or income taxes provided by a state or local government for providing services as a member of a qualified emergency response organization (defined below). Any such reabate or reduction reduces the amount of the income tax deduction for such taxes.
Qualified payments made by a state or local government for providing services as a member of a qualified
emergency response organization. The exclusion is limited to $30 multiplied by the number of months the member performs such services. A charitable deduction for expenses paid by the member in connection with performing such services must be reduced by any payment excluded from income.

A qualified volunteer emergency response organization is any volunteer organization organized and operated to provide firefighting or emergency medical services for persons in a state or local jurisdiction and required by written agreement with that state or local jurisdiction to furnish such services.

Exclusion from wages. You can exclude any qualified state or local tax benefit and any qualified payment from the employee’s wages. The excluded wages are not subject to federal withholding, social security tax, Medicare tax, and unemployment tax.

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.

(a) In General- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by inserting after section 139A the following new section:

SEC. 139B. BENEFITS PROVIDED TO VOLUNTEER FIREFIGHTERS AND EMERGENCY MEDICAL RESPONDERS.

(a) In General- In the case of any member of a qualified volunteer emergency response organization, gross income shall not include--

(1) any qualified State and local tax benefit, and

(2) any qualified payment.

(b) Denial of Double Benefits- In the case of any member of a qualified volunteer emergency response organization--

(1) the deduction under 164 shall be determined with regard to any qualified State and local tax benefit, and

(2) expenses paid or incurred by the taxpayer in connection with the performance of services as such a member shall be taken into account under section 170 only to the extent such expenses exceed the amount of any qualified payment excluded from gross income under subsection (a).

(1) QUALIFIED STATE AND LOCAL TAX BENEFIT- The term `qualified state and local tax benefit' means any reduction or rebate of a tax described in paragraph (1), (2), or (3) of section 164(a) provided by a State or political division thereof on account of services performed as a member of a qualified volunteer emergency response organization.

(2) QUALIFIED PAYMENT-

(A) IN GENERAL- The term `qualified payment' means any payment (whether reimbursement or otherwise) provided by a State or political division thereof on account of the performance of services as a member of a qualified volunteer emergency response organization.

(B) APPLICABLE DOLLAR LIMITATION- The amount determined under subparagraph (A) for any taxable year shall not exceed $30 multiplied by the number of months during such year that the taxpayer performs such services.

(3) QUALIFIED VOLUNTEER EMERGENCY RESPONSE ORGANIZATION- The term `qualified volunteer emergency response organization' means any volunteer organization--

(A) which is organized and operated to provide firefighting or emergency medical services for persons in the State or political subdivision, as the case may be, and

(B) which is required (by written agreement) by the State or political subdivision to furnish firefighting or emergency medical services in such State or political subdivision.

(d) Termination- This section shall not apply with respect to taxable years beginning after December 31, 2010.'.

(b) Clerical Amendment- The table of sections for such part is amended by inserting after the item relating to section 139A the following new item:

Sec. 139B. Benefits provided to volunteer firefighters and emergency medical responders.'.

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