In general, any form of military payment obtained while deployed to a combat zone is excluded from federal income tax. This translates into significant tax savings for the active combat service member and his family at home.
The military is entitled to several tax benefits that can increase their take-home pay, such as housing and food tax exemptions, which can amount to around 30 percent of a service member's total compensation exclusion of services and taxes from the combat pay tax exclusion.
Any form of payment obtained during a combat zone is exempt from federal income tax. This translates into significant tax savings for the active combat service member and his family at home.
Combat Zone
When a member of the armed forces serves in an area designated by the Ministry of Defense as a combat zone or serves directly to support military operations in the combat zone, his income during that period will generally be considered exempt from federal income tax.
Combat Pay Tax Exclusion
Although any base salary earned by a soldier while serving in a combat zone is exempt from federal income tax, it is still subject to Social Security and health tax.
For enlisted personnel, the amount of federal income tax exclusion is unlimited.
For officials, the exclusion is limited to the maximum amount of payment recorded.
States vary depending on whether or not they apply the federal tax exclusion to income tax.
Part-Time Service in a Combat Zone
If you serve in a combat zone for at least one day during a month, you will be banned from the entire month's combat zone.
Definition of the combat Zone
A combat zone is an area designated by the President of the Executive Order as the area in which the United States armed forces are engaged in combat. A zone generally becomes a combat zone and ceases to be a combat zone on the President's decree dates.
Definition of a direct support zone
Certain areas outside of combat zones are called direct support zones. Personnel in these zones maintain, defend, and assist those involved in military operations in a designated combat zone. To benefit from the tax exclusion in the combat zone, they must also be eligible to receive payment for hostile fire or payment for imminent danger.
Designated combat zones
Arabian Peninsula - January 17, 1991:
Gulf of Aden
Gulf of Oman
The Arabian Sea, located north of 10 degrees north latitude and 68 degrees west longitude
The Red Sea
The total area of Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
Kosovo region - March 24, 1999:
Federal Republic of Yugoslavia (Serbia / Montenegro)
Albania
Kosovo
The Adriatic Sea
The Ionian Sea: north of the 39th parallel
Afghanistan - September 19, 2001
Direct Support Zones
The personnel serving in support of military operations in Afghanistan in the following locations may also benefit from a combat zone tax exclusion:
Jordan, Kyrgyzstan, Pakistan, Tajikistan, and Uzbekistan (September 19, 2001)
Yemen (April 10, 2002)
Djibouti (as of July 1, 2002)
Somalia and Syria (since January 1, 2004)
Lebanon (from February 12, 2015, to February 11, 2020)
Serve in direct support to military operations in the Arabian Peninsula in the following locations:
Jordan (March 2, 2003)
Turkey east of longitude 33.51 E (September 19, 2016, to September 18, 2021)
Lebanon (from February 12, 2015, to February 11, 2020
What is a Duty in a Combat Zone?
You are considered to be on duty in a combat zone if you are assigned to a combat zone or eligible to receive payment for hostile fire / imminent danger in a combat zone. Service in a combat zone includes any period during which you are absent from service due to illness, injury, license, or TAD / TDY, unless the license, TAD / TDY includes the full calendar month.
If, as a result of service in a combat zone, a person becomes a prisoner of war or disappears in action, that person is considered to be serving in the combat zone as long as he maintains this condition for payment purposes.
Non-Qualifying Presence in the Combat Zone
The following military duty does not qualify as combat zone service:
Presence in a combat zone during a leave from a service station located outside the combat zone,
Pass over or through a combat zone traveling between 2 points outside a combat zone, and
Presence in a combat zone only for personal comfort.
Hospitalized on Duty in the Combat Zone
If you are hospitalized while on duty in the combat zone, the injury, illness, or wound that caused the hospitalization is presumed to have occurred while serving in the combat zone, unless proven otherwise.
Admitted to hospital after leaving the combat zone: In some cases, your injury, illness, or wound may have occurred while serving in the combat zone, even if you were not hospitalized before your departure; if so, you may be eligible for a combat zone tax exclusion while in hospital.
Other Excluded Payments
The exclusion from combat payment charges also applies to other types of compensation earned by a military member in the same month in which he served in a designated combat zone. Specifically, this includes reinstatement bonuses, which may mean that a significant amount of payment will be protected by federal income tax to benefit the registered service member and their family.
For officers, different types of special salaries, depending on career or location of service, are excluded from federal income tax while serving in a combat zone, such as:
Flight payment
Foreign language pay
Maritime payment
Medical or dental payment
Payment for special tasks
Payment of taxes for difficult conditions
The Amount of the Tax Exemption Benefit
Like other tax benefits, the fight against tax exclusion has significant financial value for the military as a taxpayer.
For example: If a member is posted to a combat zone for six months, half of his annual base salary is excluded from federal income tax. Concretely, this could mean excluding tax salaries of $ 14,000 to $ 16,000. A member registered with a marginal tax rate of 15% would save over $ 2,000 in federal income tax.
Cancellation of Tax Debt
Suppose a member of the military is killed in action while deployed to a combat zone or subsequently died as a result of injuries sustained during a combat zone. In that case, your surviving family can file a special request with the IRS for the forgiveness of pending member federal revenues tax debt. This tax benefit can also be applied to obtain a refund for the surviving family if taxes have already been paid.
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