What Is Combat Pay?
Combat pay is a tax-exempt monthly stipend paid to all active members of the U.S. armed services who are serving in designated hazardous zones. It is paid in addition to the person’s base pay.
- Combat pay is a bonus paid to military service personnel who are serving in regions that are designated hazardous zones.
- The additional pay is generally not subject to federal income tax, although Social Security and Medicare taxes are deducted.
- Combat pay is factored into applications for student aid made through the Free Application for Federal Student Aid (FAFSA) form.
Understanding Combat Pay
Members of the armed services qualify for combat pay if they are subject to—or wounded by—hostile fire or explosive mines, or on duty on foreign soil and subject to the threat of physical harm or imminent danger due to civil unrest, civil war, terrorism, or wartime conditions.
Combat pay is open to more than combat soldiers. Any person enrolled in a branch of the U.S. military who is assigned to a designated hazardous area is eligible to receive combat pay.
The concept of recognizing greater risk with extra pay originated during World War II. Originally called badge pay, it was instituted to promote morale among the infantry and increase retention.
Combat pay can be categorized as hostile fire pay and imminent danger pay, and it is prorated for partial months. You cannot receive hostile fire pay and imminent danger pay at the same time.
How Much Is Combat Pay in 2021?
As of 2021, combat pay is $225 a month, on top of a basic pay rate that varies widely. Basic pay is based on military rank and years of service.
Combat pay is generally not counted as federal taxable income. However, the recipient must still pay Social Security and Medicare taxes on the extra pay. States set their own rules for taxing combat pay. The U.S. Department of Defense can also designate certain combat zones as excluded from the tax break.
Military personnel with dependents also receive a monthly Family Separation Allowance (FSA) anytime that they are away from their families for 30 or more days.
In addition, personnel serving in combat zones can deposit up to $10,000 a year into a special savings account that pays a guaranteed 10% interest annually. This program was established during the Vietnam War.
List of Countries Where Combat Pay Applies
The United States is not actively engaged in actual combat in all of the countries on the combat zone list. The list also includes combat support areas and contingency operations areas.
Countries and areas designated as combat zones include:
- Federal Republic of Yugoslavia
- Adriatic Sea
- Persian Gulf
- Red Sea
- The entire land area encompassing Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates
As of 2021, the United States has four active combat zones approved for tax benefits by the Internal Revenue Service: the Sinai Peninsula, the Afghanistan area, the Kosovo area, and the Arabian Peninsula area.