CZTE — Combat Zone Tax Exclusion
Pay earned by enlisted, warrant officers, and (capped) commissioned officers in a designated combat zone is FEDERAL-INCOME-TAX-FREE. Includes base pay, hardship duty pay, hostile fire/imminent danger pay, and reenlistment bonuses signed while in-theater.
How to access
Restrictions
Officers' exclusion capped at the highest enlisted pay rate + hostile-fire pay. Reenlist while in-theater = the entire reenlistment bonus is tax-free, even if paid out over years. Pair with TSP Roth contributions: contributing to Roth TSP from tax-free CZTE pay means the money goes IN tax-free and comes OUT tax-free at retirement — best deal in the federal tax code. Stack with SDP (10% guaranteed)
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