Combat Zone Tax Provision

Being a member of the United States Armed Forces can make completing a tax return even more difficult than the average tax return—some income is taxable, some is not taxable; some income is partially taxable due to deployments, types of orders and changes in orders. This particular article deals with combat zone tax provision, as per the Internal Revenue Service regulations.
Combat zone tax provisions are made for service members currently serving on the ground or in the airspace above the following geographical locations:

• Arabian Peninsula Areas, defined as: the Persian Gulf, Red Sea, Gulf of Oman, Gulf of Aden, and the Arabian Sea (north of 10° North latitude and west of 68° East longitude)
• The countries of Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and UAE
• Kosovo area, defined as: Federal Republic of Yugoslavia (Serbia and Montenegro), Albania, the Adriatic Sea and the Ionian Sea north of the 39th Parallel

Additionally, Public Law 104-117 states that Croatia, Macedonia, and Bosnia and Herzegovina is considered ‘Qualified Hazardous Duty Area,’ and is to be treated as if it were a combat zone. The Department of Defense has also qualified several areas for combat zone tax benefits due to their importance of military operations in combat zones:

• Pakistan, Tajikistan, Jordan
• Kyrgyzstan and Uzbekistan
• The Philippines, for troops under Operation Enduring Freedom orders
• Yemen
• Djibouti and Somalia

Service members serving stateside or abroad (non-combat zones) do not receive any sort of exclusion from gross pay unless they are receiving hostile fire or imminent danger pay that is certified by the Department of Defense. Military members currently serving in a combat zone are also eligible for filing extensions for the duration of service orders, as well as an additional 180 days after the last date of service in a combat zone without penalty.
 
For more information about specific circumstances, visit the IRS webpage here, or give Pathways Consulting a call!