Discussion:Military combat zone pay
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Discussion Forum Index --> Tax Questions --> Military combat zone pay
| 25 April 2007 | |
| Client works for a Navy subcontractor. Has letter from Dept of the Navy to certify she has met the requirements IAW ref to receive Combat Pay Tax Exclusion for certain dates in 2006.
Since her W-2 is not from the Navy, but a Navy sub, and all pay is included in here W-2 line 1...where on the return should I put the amount of pay that is excluded? Prior accountant put the combat pay amount on line 4a of Form 2106. Does this seem right to those of you with more experience than me????
Jim F | |
| 25 April 2007 | |
| My understanding is that combat pay exclusion applies only to members of the military when it is paid by the military. Does not apply to civilians or civilian employees of the government. | |
| 25 April 2007 | |
| The pay must be received for "active service" as a member of the armed forces. Doesn't sound like your client is a "member" of the armed forces. However, your client may very well qualify for the filing extension for support personnel working in combat zones. | |
| 25 April 2007 | |
| Does the Dept. of Navy letter specify the IRC code section under which her pay is excludable? IRC Sec 122 exclusion applies only to active duty military, as others have said. That means uniformed members of the armed services, not civilians.
If she qualified for the Sec. 122 exclusion, the eligible compensation would not be included in her W-2. | |
| 25 April 2007 | |
| You mean civilians overseas want to be paid 5 times more than the enlisted folk and still not pay taxes? I hate Haliburton.... | |
Jditlevson (talk|edits) said: | 30 April 2007 |
| I am wondering what income is taxable while in the combat zone. Specifically, I am currently deployed and will have income from capital gains, interest, and student loan repayment (from the Army). The majority of this income will come from the student loan repayment which is normally considered taxable income. If this is considered taxable income and I spend the entire 2007 year deployed, what deductions am I entitled to?
SGT D Iraq | |
TheTinCook (talk|edits) said: | 1 May 2007 |
| Jditlevson: Check out Publication 3. Student loan repayment is excluded from your gross income, if the year of service required to earn the repayment is performed in a combat zone. This is done pro rata, if for example you spent 5 months of the year in a combat zone then only 5/12 of the repayment would be excludable.
There are a couple of elections you can make regarding your non-taxable combat pay that can affect your earned income credit and the additional child tax credit. Check with your tax preparer when it's time to do your 07 taxes. You should also know that you can now treat non-taxable combat pay as compensation for determining IRA contributions and deductions. | |
