If you’re a
member of the U.S. Armed Forces serving in a combat zone, you
can exclude certain pay from your
income.
A combat zone is an area designated by
the U.S. President by Executive Order as
an area in which U.S. Armed Forces are
engaging in or have engaged in combat.
Service outside a combat zone is
considered to be inside a combat zone if
the service is in direct support of
combat zone military operations.
Service outside a hazardous duty area
for support of operations in a hazardous
duty area is treated as serving in a
combat zone only for the purpose of
getting an extension deadline.
The following income received during
service in a combat zone doesn’t have to
be reported as gross income:
Active duty pay earned in any month
served in a combat zone
Imminent danger/hostile fire pay during
a month served in a combat zone
Re-enlistment bonus if re-enlistment or
voluntary extension occurs during a
month served in a combat zone
Pay for accrued leave — the department
of defense must determine the unused
leave was earned during the month served
in a combat zone
Pay for duties as a member of the Armed
Forces in clubs, messes, post and
station theaters, and other
non-appropriated fund activities earned
during a month served in a combat zone
Awards or achievement pay made for a
suggestion or achievement made in a
month served in a combat zone
Student loan repayments if the entire
year of service required to earn the
repayment was performed in a combat zone
If you're a commissioned officer (other
than a commissioned warrant officer),
the combat pay exclusion for any month
is limited to the highest rate on
enlisted pay (plus hostile fire/imminent
danger pay, if any).
You do not claim an exclusion for combat
pay on your tax return.
If you served in a combat zone for 1 or
more days during a particular month,
you’re allowed the above exclusions for
that entire month. Combat zone service
includes any periods you are absent from
duty due to illness, wounds or leave. A
person is considered to be serving in a
combat zone if he or she becomes a
prisoner of war or is missing in action
if that status is kept for military pay
purposes.
You can also exclude military pay earned
while hospitalized (you don’t have to be
hospitalized in the combat zone). Your
hospitalization must be due to having
served in a combat zone. This is true
even if you’re hospitalized after combat
zone service.
Combat Zone Considerations
Military service outside the combat zone
is, for tax purposes, considered to be
inside a combat zone if the service is
in direct support of combat zone
military operations and the service
qualifies you for special military pay
for duty subject to hostile fire or
imminent danger.
Situations not
considered to be in a combat zone:
You’re present in a combat zone during
leave from a duty station located
outside the combat zone.
You pass over or through a combat zone
during a trip between 2 points which are
outside a combat zone.
You’re in a combat zone only for your
personal convenience.
Hazardous Duty Areas
Members of the Armed Forces who serve
outside a hazardous duty area in support
of operations in a hazardous duty area
are treated as serving in a combat zone
only for the purpose of getting an
extension. Meeting additional
requirements may entitle you to full
combat zone tax benefits.
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