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Military Income

What income is taxable and what income may be excluded?

As a military service member, there are specific rules about what you have to report to the IRS as income and what you don't have to report. The following table identifies income that should be included in or excluded from your gross income. Military income received for service in a combat zone is excluded from gross income. The exclusion for a commissioned officer is limited. However, military taxpayers who receive tax-free combat pay can continue to include it as earned income when determining the Earned Income Credit and Additional Child Tax Credit, and for purposes of making an IRA contribution.

Included in Income

• active duty wages
• back wages
• drills, training wages
• cost-of-living allowance
• career sea, diving, foreign duty
• hardship duty wages
• enlistment and re-enlistment bonuses
• overseas extension bonuses
• officer bonuses

 Excluded from Income

• combat pay
• basic allowance for housing & subsistence
• overseas housing allowance
• certain dependent educational expenses
• moving allowances & storage
• military base closure benefits
• travel allowances & per diem
• uniform allowances
• dependent care assistance
• medical/dental care

 Related IRS Publications: 3

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