What is the Combat zone tax exclusion?
Combat zone tax exclusion is a federal tax benefit allowing military personnel serving in designated combat zones to exclude qualifying military pay from taxable income, with enlisted members excluding all combat pay regardless of amount and officers excluding pay up to the highest enlisted rate plus imminent danger pay, which is $9,750 monthly for 2025. The exclusion applies to active-duty pay, hostile-fire pay, and reenlistment bonuses received during combat-zone service. Service members receive automatic filing extensions of 180 days after leaving combat zones. This provision reduces adjusted gross income, potentially increasing eligibility for the Child tax credit and Health savings account contributions for military families.
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