Troops Get Some Income Tax Relief for Combat Zone Service
By Gerry J. Gilmore
American Forces Press Service
WASHINGTON, Jan. 24, 2003 Military members serving in designated combat zones in support of the war against global terrorism get a tax break from Uncle Sam.
Depending upon rank, eligible service members can exclude from federal income tax either all or some of their active duty pay -- and certain other pays -- earned in any month during service in a designated combat zone.
According to the Internal Revenue Service's Armed Forces' Tax Guide for 2002, "a combat zone is any area the President of the United States designates by Executive Order as an area in which the U.S. Armed Forces are engaging or have engaged in combat."
Current combat zones are Afghanistan, specified parts of the Kosovo area and the Persian Gulf region. The tax guide defines the qualifying areas.
Service members in several other areas specified in law as "qualified hazardous duty areas" are eligible for the same tax breaks. Bosnia-Herzegovina, the Former Yugoslav Republic of Macedonia and Croatia have been listed since November 1995.
Some members providing direct support for military operations within a designated combat zone or qualified hazardous duty area may also be eligible for income tax exclusions. New for 2002 are service in Djibouti, Africa, after July 1, 2002; and service in the Philippines after Jan. 9, 2002, providing members' orders specify their duty is "in direct support of Operation Enduring Freedom - Philippines."
Service members who serve one or more days in a designated combat zone are entitled to federal tax exclusion benefits for that entire month, according to the IRS.
The downloadable Armed Forces' Tax Guide for 2002 can be accessed on the Web at www.irs.gov/pub/irs-pdf/p3.pdf. It lists many, but not all, designated combat zones.
While military members can use the tax guide in preparing their 2002 federal tax returns, those who have specific questions about designated combat zones should contact their unit personnel or pay officials or unit tax assistance officer.
The IRS guide notes service members normally don't need to claim the combat zone exclusion or subtract eligible earning on their federal tax returns. The services normally have already excluded combat zone earnings from the taxable gross income reported on service members' Form W-2s, the guide says.
The IRS points out that military retired pay and pensions aren't eligible as combat zone income tax exclusions.