Special & Incentive Pays
Combat & Special Pay Estimator
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Frequently asked questions
Common questions from service members and veterans. Your exact number comes from the calculator above; every answer cites the official source.
Which pay is tax-free in a combat zone, and is there a cap for officers?⌄
The Combat Zone Tax Exclusion (CZTE) removes federal income tax from basic pay, reenlistment and bonus pay, and certain special pay earned in a designated combat zone. It is unlimited for enlisted and warrant officers. For commissioned officers it is capped at the highest enlisted basic pay plus hostile-fire/imminent-danger pay per month. BAH and BAS are not 'excluded' because they are already non-taxable.
Source: IRS / militarypay.defense.gov CZTE
How does the combat-zone exclusion work with Roth TSP, is it really tax-free coming and going?⌄
Yes, this is the power move. Contributing tax-exempt combat pay to ROTH TSP means the money goes in untaxed (because of CZTE) AND comes out untaxed, with tax-free growth in between, so it is never taxed at all. Contributing tax-exempt pay to Traditional is less ideal because you give up an up-front tax break you already have. During a qualifying combat-zone month you can contribute up to the much higher annual-additions limit instead of the normal deferral cap.
Source: IRS / TSP.gov / militarypay.defense.gov
How much can I contribute to TSP in a combat zone?⌄
Combat-zone tax-exempt pay counts toward the higher annual-additions limit, which combines your contributions and the match and is several times the normal elective-deferral cap. So deployed members can contribute far more than usual, a rare window to load up tax-advantaged dollars. Check the current-year IRS annual-additions figure on TSP.gov before front-loading.
Source: IRS / TSP.gov contribution limits
Is the Savings Deposit Program (SDP) real, and how do I get into it?⌄
Yes. SDP pays a 10% annual rate on up to $10,000 while you are deployed to an SDP-eligible combat zone (or drawing hostile-fire/imminent-danger pay). You become eligible after 30 consecutive days deployed, or one day in each of three consecutive months. Set it up through your Finance/DFAS office by cash, check, or allotment. Interest continues for up to 90 days after you leave the zone.
Source: DFAS / militaryonesource.mil SDP
Is combat pay the same as the combat-zone tax exclusion?⌄
Not exactly. Hostile-fire/imminent-danger pay is a specific monthly special pay you receive for serving in a danger area. The Combat Zone Tax Exclusion is the separate rule that makes your pay federally tax-free while in a designated zone. You can receive both, and the officer CZTE cap is set partly by the imminent-danger pay rate. Run the calculator to estimate your tax-free pay.
Source: DFAS / IRS