Military tax free deployment pay - is it a thing?

Rising junior here, exploring possible paths for after high school. I've heard rumors about a military tax-free deployment pay. Can someone confirm whether this is true? If so, how does it work and what are the conditions? Just trying to get a feel for all my options.

Yes, this is a real thing. It's called Combat Zone Tax Exclusion (CZTE). Basically, if a U.S. military service member serves in a designated combat zone, all their military pay for that period is exempt from federal income tax. In some cases, a part of their income is exempt up to a certain limit.

Here's the quick breakdown: enlisted members and warrant officers may exclude all their military pay for each month of service in a combat zone. However, for commissioned officers, the exclusion is capped at the highest enlisted pay amount, plus any imminent danger or hostile fire pay they received. For 2024, the maximum officer exclusion is $9,333.67 per month.

The benefit also extends to service in support of a combat zone if the Department of Defense designates such service for hostile fire/imminent danger pay.

As per IRS, the list of designated combat zones can be found on their website. It's important to know that this information can change, so it's crucial to stay updated.

Having a portion of your income that is tax-free can be a significant financial benefit especially considering the other financial benefits offered by the military such as subsidized housing and food, as well as healthcare at minimal costs.

Of course, military service is a serious commitment and the decision to enlist should be based on more than just financial benefits. It's also important to consider factors like job opportunities after service, education benefits, personal values, and the potential impact on your life and your family, among others. Keep exploring and asking questions to make an informed decision.