Service Members Supporting Enduring Freedom Get Tax Break
By Gerry J. Gilmore
American Forces Press Service
WASHINGTON, Dec. 14, 2001 U.S. troops serving in Afghanistan as part of Operation Enduring Freedom will pay little or no federal tax this year thanks to an executive order President Bush signed today.
The order, effective Sept. 19, 2001, declares that the country of Afghanistan and the airspace above it is a combat zone. It makes service members involved in combat operations in or above Afghanistan eligible for certain tax benefits.
DoD will also certify the eligibility of certain troops outside of Afghanistan to receive these tax benefits. To be eligible, these troops must be directly supporting operations in Afghanistan and must be receiving imminent danger pay or hostile fire pay for reasons related to the Afghanistan operation.
According to Internal Revenue Code, different degrees of tax relief exist under the combat zone tax benefits:
o For enlisted members and warrant officers, all compensation for active service earned in a combat zone is tax-free. This includes regular basic pay. Special pay, such as re-enlistment bonuses, is also tax free if the service member re-enlists in a combat zone.
o For commissioned officers, the monthly tax exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received. Therefore, for 2001, the most an officer can earn tax free each month is $5,043 ($4,893, the highest monthly enlisted pay, $150 hostile fire or imminent danger pay).
The tax exclusion applies only to compensation for active service in the armed forces. Civilians are not eligible.
Troops serving in a combat zone are also allowed extra time to file tax returns and to attend to other tax matters. The deadline for taking actions with the Internal Revenue Service is therefore extended for at least 180 days after:
o The last day the taxpayer is in a combat zone (or the last day the area qualifies as a combat zone).
o The last day of any continuous qualified hospitalization for injury from service in the combat zone.
The tax deadline extension also applies to certain civilians serving in a combat zone, such as Red Cross workers, accredited correspondents, and other civilians acting under the direction of the U.S. armed forces in support of those forces.
Under the Internal Revenue Code, survivors of service members killed or declared missing in a designed combat zone may receive certain benefits:
o Special filing status if deceased spouse was in a missing status as a result of service in a combat zone.
o Forgiveness of income taxes of members of the armed forces who die in a combat zone or by reason of combat zone-incurred wounds.
o Reduction in estate taxes for members of the armed forces who die in a combat zone or by reason of combat zone incurred wounds.
o Survivors may file a joint return if a spouse is in missing status as a result of service in a combat zone.
Most states follow the federal lead, but service members should check with unit tax or legal advisers to be sure.
Presidents have previously designated combat zones during the Korean and Vietnam Wars, the Persian Gulf War and military operations in Kosovo.