If you're in the military, you earn nontaxable combat pay by serving in a combat zone. The zone must be designated by the President as a place where U.S. troops are in combat. The President can also end the combat-zone designation. Nontaxable combat pay doesn't show up on your W-2. You don't have to report it on your tax return at all.
You receive nontaxable combat pay for any month that you serve in a combat zone. Your pay is excluded from tax even if you only serve part of the month there. If you're hospitalized for combat-zone injuries, that counts, too. Along with base pay, the exclusion covers hostile-fire pay, reenlistment bonuses for that month, and pay for accrued leave. If your W-2 reports your combat pay, it's a mistake. Contact your finance office to get a corrected W-2.
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