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Discussion:Officer bonus in a combat zone

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Discussion Forum Index --> Consumer Questions --> Officer bonus in a combat zone

Wiznioski (talk|edits) said:

30 September 2007
I am not a tax profesional.

I would like to know how the 35,000 dollar bonus I just recieved will be taxed. I am a CPT in the US Army. I will have been deployed to Iraq for 11 months for tax year 2007. I do not make more than the most senior enlisted rank, and so prior to receiving the bonus I would have recieved all of my income as tax free. The bonus is an officer renlistment bonus. Enlisted soldiers' bonuses are considered to be tax free if recieved during a month that the service member was in a combat zone. Will this bonus be considered as just additional income, which would therefore make my income greater than that of the most senior enlisted rank? Will it be considered seperately as a renlistment bonus and thus not be taxed at all becuase it was recieved in a combat zone.

Additionally, I contributed the maximum contributions to my Thrift Savings Plan this year. The contributed dollars are all tax free though. If the bonus just counts as additional income, does my TSP contribution still reduce my taxable income?

Thank you for any answers you might provide, and appologize if this is redundant. I did not find it in the archives.

TheTinCook (talk|edits) said:

30 September 2007
No problem! We don't often get armed forces tax questions here.

The reinlistment bonus won't be included in income if you reinlisted in a month where you served in a combat zone or were receiving treatment for a combat zone related injury/disease/wound. It doesn't matter when the bonus is received.

Since you are a commissioned officer, the total CZ exclusion will be limited to the maximum enlisted amount.

Your TSP contributions will still be excluded from your taxable income even if the bonus is included in your income.

You might also want to open an IRA since the law recently changed to allow you to include combat pay in earned income.

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