Military Pay: Combat Zone vs. Non-Combat Pay
Military deployment orders can change pay and entitlements from the day orders take effect. Assignment location may play a big part, since combat and danger determine whether some military pay is tax-free. Combat vs. non-combat pay and incentives depend heavily on how the DoD assigns and designates troops worldwide.
One example? The Department of Defense does not offer certain combat pay for so-called deterrence missions, which tax authorities view differently than duty in hostile fire zones. Deterrence does not automatically equal combat.
Military Pay: Combat Zone vs. Non-Combat Operations
Service members in non-combat operations at some overseas bases may collect incentives or allowances to offset hardship and family separation, but not the same type of danger pay as those getting fired at or at risk of being fired upon during their mission.
Outside combat operations, basic pay remains subject to standard federal income taxes. But when a mission involves hostile fire or dangerous conditions, the military pay situation also changes.
In a designated combat zone, qualifying military earnings are exempt from federal income tax withholding, and secondary financial programs become available.
Combat deployments are different from non-combat operations because of tax exclusions and combat-related special pay and incentives.
Enlisted members serving in designated combat zones may pay zero federal income tax. Commissioned officers face a tax-free cap equal to the highest enlisted basic pay rate plus monthly hostile fire or imminent danger pay. Earnings above the cap may be taxable at the federal level.
Service members assigned to non-combat field operations overseas may receive non-combat allowances, but they may also receive family separation pay where appropriate and pay standard federal taxes.
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Hostile Fire Pay and Imminent Danger Pay Rules
DoD regulations authorize Hostile Fire Pay and Imminent Danger Pay during qualifying conditions.
Hostile Fire Pay requires exposure to hostile fire or related qualifying conditions, certified by a commanding officer. Imminent Danger Pay is a so-called geographic entitlement covering personnel on duty in designated locations.
Troops will not collect both entitlements in the same month. Performing duty for any portion of a month in a designated hostile fire or imminent danger area qualifies the member for the full monthly payment.
Combat Zone Tax Exclusion
The Combat Zone Tax Exclusion removes military pay from federal income taxes when the duty is performed in a designated combat zone. Serving a single day in a designated combat area excludes that servicemember’s military pay from federal income tax for the entire month.
Enlisted personnel may get federal tax-free basic pay, special pays, and bonuses. An enlisted reenlistment bonus executed inside a combat zone may be completely tax-free, but much depends on current regulations. Check with an IRS professional or a tax preparer to learn more.
Commissioned officers calculate monthly tax exclusions based on the highest enlisted basic pay rate plus hostile fire or imminent danger pay. Officer earnings exceeding that amount may be subject to federal income tax. Payroll deductions for Social Security and Medicare under the Federal Insurance Contributions Act apply regardless of tax-exclusion status.
Hazardous Duty Incentive Pay
Hazardous Duty Incentive Pay provides monthly stipends ranging from $150 to $250 (at press time) for duties including parachute jumping, flight deck work, explosive ordnance disposal, and toxic fuel handling. Performing hazardous duty does not require service inside a combat zone.
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Savings Deposit Program
The Department of Defense Savings Deposit Program provides an investment option for those deployed in qualifying areas. Troops earning Hostile Fire Pay or Imminent Danger Pay for 30 days in a row, or for one day in three consecutive calendar months, may deposit up to money into an approved SDP account up to the specified cap.
The balance accrues interest within an annual percentage range of 8 percent to 12 percent, compounded quarterly, for the duration of the deployment. Interest earnings continue for ninety days following departure from the operational area.
Non-Combat Allowances: Hardship Duty Pay and Family Separation
Peacekeeping and deterrence assignments deploy thousands of service members overseas, often to regions without a combat designation. These deployments may not qualify personnel for combat-related special pays, but other allowances apply.
Hardship Duty Pay is for those assigned to areas where living conditions fall below continental United States baselines. Evaluators assess a variety of factors, including physical isolation, severe weather, and other conditions, to establish hardship duty payment rates that may range from $50 to $1,500 per month, depending on mission and assignment category.
The Department of Defense pays Family Separation Allowance to service members with dependents when military orders require family separation for more than 30 days. Those on non-combat assignments collect this allowance under the same terms as combat-deployed troops.
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About the author
Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.
