American troops serving in designated combat zones in support of the war against terrorism continue to get a tax break from Uncle Sam. Depending upon rank, eligible service members can exclude from federal income tax either all or some of their active duty pay – and certain other pays – earned in any month during service in a designated combat zone. The Internal Revenue Service’s Armed Forces’ Tax Guide for 2003 says "a combat zone is any area the president of the United States designates by executive order as an area in which the U.S. armed forces are engaging or have engaged in combat." Service members who serve one or more days in a designated combat zone are entitled to federal tax exclusion benefits for that entire month, according to the IRS. Current designated combat zones include, Afghanistan, Iraq and other specified parts of the Persian Gulf region -- to include Kuwait, Saudi Arabia, Oman, Bahrain, Qatar and the United Arab Emirates – and parts of the Kosovo area.
Service members in several other areas specified in law as "qualified hazardous duty areas" are eligible for the same tax breaks. Bosnia-Herzegovina, the Former Yugoslav Republic of Macedonia and Croatia have been listed since 1995. The downloadable Armed Forces’ Tax Guide for 2003 can be accessed on the IRS Web site. It lists many, but not all, designated combat zones. Some service members providing direct support for military operations within a designated combat zone or qualified hazardous duty area, such as Djibouti, Africa, Turkey, Yemen, and the Philippines, are eligible for income tax exclusions.
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