Hey all, I keep hearing about some benefits of being deployed in the military. Apparently some of your deployment income is tax-free? I'd love to get more info on how this works. What parts of your income are tax-free, and what conditions apply?
Indeed, there are some tax benefits that come along with being deployed in the military. A primary one is the Combat Zone Tax Exclusion (CZTE). This policy states that if you serve in a designated combat zone, the military pay you receive during that period is not subject to federal taxes. The President designates these zones, and currently, many regions in the Middle East, such as Iraq and Afghanistan, qualify.
Keep in mind that this applies to enlisted personnel and warrant officers. For commissioned officers, there is a limit to the amount that can be excluded from income. As of 2022, commissioned officers can exclude up to the highest enlisted pay plus other compensation (hostile fire pay, imminent danger pay), even if it's less than their earned income.
The CZTE also qualifies you for additional benefits. For example, the deadline for filing tax returns, paying taxes, filing a claim for refund, and other IRS actions can be extended.
Another noteworthy benefit is the Earned Income Tax Credit (EITC). Deployed members can count tax-free combat pay as earned income when claiming this credit, potentially increasing the amount they receive.
However, tax laws and military benefits can be complex and often vary based on individual situations. So, it's always a good idea to consult with professionals who are well-versed in military-specific tax issues to get a more complete and personalized understanding.
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