Military members may be entitled to extra pay, depending on the circumstances. These special pays are subject to income tax, unless earned in a designated combat zone, such as in the case of Combat Pay.
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Military Special Pay: Combat Pay

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Military members may be entitled to extra pay, depending on the circumstances. These special pays are subject to income tax, unless earned in a designated combat zone, such as in the case of Combat Pay. If you are serving in the military and are assigned or deployed to a combat zone receives Combat Pay (officially called Immiment Danger Pay) at the rate of $225.00 per month.

TAX ADVANTAGES OF COMBAT PAY

Being assigned to or working in a combat zone triggers also triggers a tax advantage, in some locations. Congress and/or the President can designate combat zones as "Tax Exempt" areas. Earnings received while in these combats zone are excluded from taxable income. (This only applies to Federal Income Tax Withholding (FITW). A military member still pays social security taxes and Medicare Tax. State Tax is determined by the individual state.) This tax exclusion for Combat Pay is unlimited for enlisted members and is limited to the maximum enlisted pay amount for officers and warrant officers.

If you spend even one single qualifying day in the combat zone, your pay for the entire month is excluded from taxable income, and you receive $225 in Combat Pay for that month.

Bonuses and special pays are also excluded from taxable income if it is within the stated limitations and earned in the same month in which you served in a combat zone.

For example, an enlisted reenlistment bonus is excluded from taxes if the member reenlists in the same month in which the member served in a combat zone. Since there is no limitation on amounts excluded for enlisted members, the entire reenlistment bonus would be excluded.

HARDSHIP DUTY PAY

In addition to Imminent Danger Pay (Combat Pay), and the tax exclusion, some areas qualify for a special monthly allowance called Hardship Duty Pay. Military members with dependents also receive Family Separation Allowance (FSA) in the amount of $250.00 per month, anytime they are away from their families (due to military orders) for 30 days or longer.

SPECIAL SAVINGS ACCOUNT PROGRAM FOR COMBAT PERSONNEL

Finally, members in a combat zone are authorized to deposit up to $10,000 (per year) of their pay and allowances into a special savings account, which guarantees 10 percent interest per year. This program was established during the Vietnam era, phased out at the end of the Vietnam War, then revived in 1991 during the Gulf War. The special savings account program still exists today.

A partial list of current designated combat zones includes Afghanistan, Bahrain, Iraq, Kuwait, Kyrgyzstan, Montenegro, Oman, Pakistan, Philippines, Qatar, Saudi Arabia, Serbia (Includes Kosovo), Tajikistan, Turkey (in some cases), United Arab Emirates, Uzbekistan, Yemen. Combat zone sea areas include the Persian Gulf, Red Sea, Gulf of Oman, Arabian Sea (North of 10 degrees N, and west of 68 Degrees E), Gulf of Aden.



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