If you thought that the only benefits to serving in the military were travel to exotic places and running gunfights with the locals, you would be wrong. Your Uncle Sam thinks that enlisted or warrant officer U.S. military personnel should not have to pay federal tax on any income received during any month they are assigned to a combat zone.
You read right.
If you?re getting shot at, you don?t owe Sammy a single cent. While maybe not enough of an incentive to actively seek a combat assignment, if you?re already there or on the way, it could help when you get back. The Iraq, Afghanistan, and Kosovo theaters all apply. Even better, you can use this tax free pay to contribute to your Individual Retirement Account (IRA). Since you don?t have to pay taxes on IRA holdings until withdrawal, it makes a lot of sense to contribute as much tax free dinero as you can today.
There are a few other tax related items to keep in mind when taking shelter behind that Iraqi sand dune. While engaged in combat operations you qualify for up to a 180 day extension to:
1. File your return
2. Pay your taxes
3. Claim a refund
4. Contribute to an IRA
Other tax deductions you should investigate are related to 1) moving expenses 2) transitioning back to civilian life 3) free tax assistance.
The Young Wealth Team