Search Investopedia

Heroes Earned Retirement Opportunities Act - HERO

Filed Under » , , ,
Dictionary Says

Definition of 'Heroes Earned Retirement Opportunities Act - HERO'

Legislation passed by Congress on May 18, 2006, that allows tax-free combat-related compensation received by military personnel to be considered taxable income for IRA contribution purposes. Military personnel also will be able to make IRA contributions based on combat pay earned from January 2004 to May 2006 - up to two years before the act became law.
Investopedia Says

Investopedia explains 'Heroes Earned Retirement Opportunities Act - HERO'

Previous to the act's creation, military personnel who primarily received combat pay as their main source of compensation would not be able to contribute to an IRA. Because combat pay is not considered taxable and IRA regulations stipulate that the maximum IRA contribution is the lesser of either $4,000 or the amount of taxable income received, the maximum contribution allowed was effectively zero dollars.

Related Definitions

  •

    Individual Retirement Account - IRA

    An investing tool used by individuals to earn and earmark funds for retirement savings. There are several types of IRAs: Traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs. ...
    Read More »

  • Income Tax

    A tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to ...
    Read More »

  • Taxable Income

    The amount of income that is used to calculate an individual’s or a company’s income tax due. Taxable income is generally described as gross income or adjusted gross income minus any ...
    Read More »

    • Income

      Economic wealth that is generated in exchange for an individual's performance of agreed upon activities or through investing capital. Income is consumed to fuel day-to-day ...
      Read More »

    • Roth IRA

      An individual retirement plan that bears many similarities to the traditional IRA, but contributions are not tax deductible and qualified distributions are tax free. Similar to other ...
      Read More »

    • Traditional IRA

      An individual retirement account (IRA) that allows individuals to direct pretax income, up to specific annual limits, toward investments that can grow tax-deferred (no capital gains or ...
      Read More »

    • Catch-Up Contribution

      A type of retirement savings contribution that allows people over 50 to make additional contributions to their 401(k) and/or individual retirement accounts. The catch-up contribution ...
      Read More »

    • Combat Pay

      A tax-free form of compensation paid to members of the armed forces who are on active duty in a designated combat zone or hazardous duty area. Combat pay includes active duty pay, ...
      Read More »

    • Work Opportunity Tax Credit

      A separate, nonrefundable credit that is part of the general business credit. The work opportunity tax credit is designed to encourage employers to hire workers from certain minority ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions