Tax-Free Military Pay
Editor’s Note: Are you a member of the military and want to know more about tax-free military pay? You’ve come to the right place. Learn more about military non-taxable income below.
Who Qualifies for Tax-Free Military Pay?
If you are a member of the military who served in a combat zone, your income may not be taxed by the IRS. Tax-exempt military pay applies if:
- You’re a member of the U.S. Armed Forces.
- You serve in a designated combat zone or were as hospitalized for wounds, disease, or injury in a designated combat zone.
If You Qualify, Do You Need to Take Additional Steps?
If you qualify for tax-free military pay, you don’t have to take an additional action to get this exemption. Your governing military organization will omit reportable income on your W-2 if you qualify for tax-free military pay. If you think you’re entitled to tax-free military pay and your W-2 shows the full, unadjusted annual pay, contact your presiding military pay office to correct your W-2.
Provisions of Military Non-Taxable Income
There are a few provisions to receive a military tax-exempt status, according to the IRS:
You can exclude the following income related to military compensation:
- Basic pay
- Reenlistment or continuation bonuses
- Student loan repayments
- Imminent danger/hostile fire pay
- Leave benefits
- Awards and other financial incentives
Timing for Eligibility
Members of the military receive an exclusion for months served in a combat zone, including partial months of service.
What Taxes are Combat Zone Wages Subject To?
Military pay earned while in a combat zone is subject to Social Security and Medicare taxes and will show on your W-2.
The following people qualify for tax-free military pay during any month served in a combat zone:
- Enlisted members
- Warrant officers and/or commissioned warrant officers
Commissioned officers can exclude imminent danger or hostile fire pay plus regular pay limited to the highest rate of enlisted pay during any month served in a combat zone.
Military veterans do not qualify for the tax-free military pay.
For 2018, the applicable amount is $8,586.00 per month (that is, $8,361.00 for the highest enlisted pay + $225 for imminent danger pay).
Where to Go for Tax Help
Are Social Security benefits considered taxable income? Learn more about Social Security taxability and how it relates to retirement income at H&R Block.
Do you have to include Social Security survivor benefits for your child on your taxes? Learn more from the tax experts at H&R Block.
Did you sell property over the past tax year? Find out from the experts at H&R Block how to calculate cost basis for your real estate.
Learn more about using form 8615 and 8814 to file child’s unearned income with help from H&R Block.