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July 20, 2008 Topic: Tax We receive frequent questions from members of the U.S. armed forces about exclusions from income while they are serving in a combat zone. If you serve in a combat zone as an enlisted person or as a commissioned warrant officer for any part of a month, all of your military pay received for military service that month is excluded from gross income. For commissioned officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received. To answer the most common question posed to us about this, the exclusion will (unfortunately) not protect your lottery winnings from taxation. Combat zones are designated by an Executive Order from the President as areas in which the U.S. Armed Forces are engaging or have engaged in combat. Your service branch must certify your entitlement on the Form W-2 it provides you. If you believe you are entitled to the exclusion, but it is not reflected on your Form W-2, you should request that your service branch issue a corrected Form W-2. |
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