Understanding tax exemptions while serving in the military

Hey everyone. I'm thinking about joining the military after high school and I heard that being deployed has certain tax benefits. Is it true that military deployment makes some or all of your income tax exempt? And under what specific circumstances does this tax exemption for deployed military personnel apply?

Yes, you're correct. There are indeed certain tax benefits that military personnel can qualify for when they are deployed. The specific provision you're referring to is typically known as the Combat Zone Tax Exclusion (CZTE). Under this provision, any enlisted member, warrant officers, or commissioned warrant officers who serve in a designated combat zone can exclude their military pay from their gross income for income tax purposes. This can include active duty pay, reenlistment bonus, pay for accrued leave, and others.

Because officers have higher pay, they do have a cap on how much of their income can be excluded, which is the maximum enlisted pay plus any hostile fire or imminent danger pay they may receive.

Furthermore, the months in which you served in a combat zone are considered as a full month. So even if you served for just one day in a combat zone in a particular month, the income for that entire month can be excluded.

This provision does only apply to federal taxes, not state taxes. But some states may also offer tax benefits for military personnel, so it's worth looking into the specifics for your home state. I recommend consulting with a tax professional or using tax software that caters to the military to ensure you're taking full advantage of all tax benefits available to you.