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
Considering a withdrawal from your SIMPLE or SEP-IRA due to coronavirus impacts? Learn from tax experts at H&R Block’s what you should consider.
Learn more about how Roth IRA contributions are taxed with help from the experts at H&R Block.
Learn more about the myRA retirement planning account by the U.S Treasury Department from the tax experts at H&R Block.
Learn more about IRS Form 2439 and get tax answers at H&R Block.