Any form of pay earned while on deployment in a combat zone is excluded from federal income tax. This translates to a significant tax savings for the active service member in combat and his family back home.

Should I include combat pay in your income?

Although certain combat pay may be nontaxable to you (See Combat Zone Exclusion in Publication 3, Armed Forces Tax Guide, for more information), you can choose to include this pay in your earned income when figuring the EIC. The amount of your nontaxable combat pay should be shown in Form(s) W-2, with code Q.

How much do soldiers make on deployment?

Military members who are assigned or deployed to a designated combat zone are paid a monthly special pay, known as combat pay (or Imminent Danger Pay). The amount paid is $225 per month for all ranks.

What is earned income Credit combat pay?

Combat pay includes all military pay—including wages earned as well as any reenlistment or other bonuses, etc. As a result, the Working Families Tax Relief Act of 2004 gave taxpayers the option (election) to include combat pay in EITC earned income.

What is the EITC income limit for 2019?

Tax Year 2019

How much money can a soldier make on deployment?

A 30-year-old soldier, deployed to a tax-exempt income zone contributes $19,500 to her Roth TSP and $6,000 to her Roth IRA (Note: IRS 2019 contribution limits in 2019 are $19,500 for the TSP and $6,000 to an IRA for personnel under 50 years of age).

What happens to your income when you deploy to a combat zone?

Deployment can cause additional financial stress during tax season. Military members who serve in a combat zone can subtract certain pay from their income. The IRS has a complete breakdown and provides much more detail, but some types you may be able to subtract include: Active duty pay earned in any month you served in a combat zone.

How to simplify your finances during deployment?

Simplify finances by being able to pay your spouse’s bills and take care of any other related financial problems. Creating a separate checking account for paying bills can ease the confusion about who is paying what and when. Your bank accounts aren’t the only things you need to keep an eye on during deployment.

What to expect in your first military deployment?

Military members stepping into their first deployment without a clear sense of what to expect financially often struggle with everything from credit and income to unnecessary expenses and granting Power of Attorney. In fact, Defense Department surveys consistently rank finances among the leading causes of stress for most military families.