If you are a military member who serves in a combat zone (defined below), you can exclude certain pay from your income when determining your taxes.
WHAT CAN BE EXCLUDED
Enlisted personnel, warrant officers, and commissioned warrant officers can exclude the following from their income:
- Active duty pay earned in any month you served in a combat zone
- Imminent danger/hostile fire pay
- A reenlistment bonus if you reenlisted in a month you served in a combat zone
- Pay for selling back leave in any month you served in a combat zone
- Some other pay received in a combat zone
The amount of pay subject to the combat zone tax exclusion each month for O-1 and above is limited to the monthly basis pay for the senior E-9 of each branch plus the monthly hostile fire pay amount. For 2017 this amount is $8,390.10.
PARTIAL MONTH SERVICE IN A COMBAT ZONE
If you serve in a combat zone for at least one day during a month, you get the combat zone exclusion for the whole month.
DEFINITION OF COMBAT ZONE
A combat zone is any area the President designates by Executive Order as an area in which the U.S. Armed Forces are engaging or have engaged in combat. An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order.
DESIGNATED COMBAT ZONES
Afghanistan area - beginning September 19, 2001:
- Jordan, Kyrgyzstan, Pakistan, Tajikistan, and Uzbekistan (as of 9/19/01)
- Philippines (from 1/9/02 - 9/30/15)
- Djibouti (as of 7/1/02)
- Yemen (as of 4/10/02)
- Somalia and Syria (as of 1/1/04)
Note. For the Philippines only, the personnel must be deployed in conjunction with Operation Enduring Freedom supporting military operations in the Afghanistan combat zone.
The Kosovo area - beginning March 24, 1999:
- Federal Republic of Yugoslavia (Serbia/Montenegro)
- The Adriatic Sea
- The Ionian Sea—north of the 39th parallel
Note. The combat zone designation for Montenegro and Kosovo (previously a province within Serbia) remains in force even though Montenegro and Kosovo became independent nations.
Arabian peninsula - beginning January 17, 1991:
- The Persian Gulf
- The Red Sea
- The Gulf of Oman
- The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude
- The Gulf of Aden
- The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates
The following countries were certified by DOD for combat zone tax benefits due to their direct support of military operations in the Arabian Peninsula combat zone.
- Jordan (as of 3/19/03)
- Lebanon (as of 2/12/15)
WHAT IS SERVICE IN A COMBAT ZONE?
You are considered to be serving in a combat zone if you are either assigned to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone.Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, leave, or TAD/TDY, unless leave, TAD/TDY includes the full calendar month.
If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes.
NONQUALIFYING PRESENCE IN COMBAT ZONE
The following military service does not qualify as service in a combat zone:
- Presence in a combat zone while on leave from a duty station located outside the combat zone,
- Passage over or through a combat zone during a trip between 2 points that are outside a combat zone, and
- Presence in a combat zone solely for your personal convenience.
QUALIFYING SERVICE OUTSIDE COMBAT ZONE
Military service outside a combat zone is considered to be performed in a combat zone if:
- The service is in direct support of military operations in the combat zone, and
- The service qualifies you for special military pay for duty subject to hostile fire or imminent danger.
Military pay received for this service will qualify for the combat zone exclusion if the other requirements are met.
HOSPITALIZED WHILE SERVING IN THE COMBAT ZONE
If you are hospitalized while serving in the combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary.
Hospitalized after leaving the combat zone: In some cases the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left, if that is the case you may be eligible for Combat Zone Tax Exclusion as long as hospitalized.