HEART Act and Military Death Tax Benefits

IRC Section 692: Complete Tax Forgiveness

The most powerful tax relief available to military survivors comes from Internal Revenue Code Section 692, and it goes far beyond a simple deduction.

If a service member dies while serving in a presidentially designated combat zone — or as a result of wounds, disease, or injury incurred while serving in a combat zone — their entire federal income tax liability is forgiven. Not reduced. Not deferred. Forgiven.

This forgiveness covers:

• The taxable year in which the death occurred
• Any prior taxable years ending on or after the first day of service in the combat zone
• Any unpaid tax liabilities for years preceding combat service

Section 692(c) extends this same exemption to federal military and civilian employees who die from wounds or injuries sustained in a "terroristic or military action" directed against the United States or its allies — even if the event occurred outside an officially designated combat zone. The one explicit exclusion: standard, non-combat training exercises do not qualify.

Separate HEART Act Claims to Verify

The combat-death tax relief explained above is under IRC Section 692. The separate tax treatment of survivor payments can depend on the payment and plan involved, so confirm the rule for the specific benefit before making a rollover or filing decision.

Retirement account protections. Do not assume every military retirement contribution or death-benefit payment can be rolled into an IRA without tax. Ask a tax professional to confirm the treatment of the specific payment before moving it.

Combat zone filing extensions. Do not assume a deceased service member's filing extension automatically carries over to a surviving spouse. Confirm the applicable filing deadline with the IRS or a tax professional.

Differential wage payments. Ask the employer plan administrator how the specific retirement plan treats differential wage payments before relying on an employer-matched contribution.

What Survivors Need to Do

Determine whether Section 692 applies. Not every military death qualifies for full tax forgiveness. The death must be connected to service in a designated combat zone or a qualifying terroristic/military action. Your Casualty Assistance Officer or a military tax advisor can help make this determination.

Confirm the filing process. Ask a tax professional whether a return, amended return, or refund claim is needed to receive Section 692 relief.

Consult a tax professional familiar with military provisions. Military tax law is specialized. Volunteer organizations like Military OneSource provide free tax preparation services for survivors, and many installations offer tax assistance through their legal offices.

Keep copies of the DD Form 1300. It is the Report of Casualty used by federal agencies such as the SSA and VA to verify an in-service death. Ask a tax professional which supporting documents the IRS requires for a Section 692 claim.

Act promptly and confirm the applicable return or refund-claim deadline with a tax professional. The After a Military Service Death toolkit includes a financial checklist that tracks tax questions alongside SGLI claims, DIC applications, and SBP enrollment.