Tuesday, November 12, 2013

Tax Breaks for Astronauts Who Die in Space

To answer the question on the mind of everyone who has ever seen the movies Armageddon or Gravity, there are two excellent tax breaks for (spoiler alert!) astronauts who die in the line of duty.

Internal Revenue Code section 692 provides that such astronauts literally do not have to pay any federal income taxes for two years -- the year of their death in the line of duty and the year before.  It doesn't matter if they made a billion dollars selling gold or bitcoins.  Zero taxes.  If some federal income taxes were withheld from their paycheck, they get that money back from the IRS.

But an even better tax break is that the same astronauts are subject to a top estate tax rate of 20%, rather than the usual top estate tax rate of 40%.  Since the estate tax applies only to those who die with over $5.25 million in assets (in 2013), wealthy multimillionaire astronaut-hopeful Lance Bass can rest assured that his estate tax bill is cut in half if he were to have a fatal accident, thanks to Internal Revenue Code section 2201.

The above tax breaks were enacted in November of 2003 by the Military Family Tax Relief Act, and they apply retroactively to all astronauts who died after December 31, 2002.  The provisions were specifically addressing the seven astronauts (six Americans and one Israeli) who died in the Space Shuttle Columbia disaster of February 1, 2003, at least one of whom presumably had over $1 million in assets (the 2003 estate tax threshold). 

While some pundits (Foreign Policy) may bemoan that Americans are falling behind the Chinese in the technological space race, Americans are still way ahead in the tax policy space race.

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