Allowances, tax breaks let troops save up overseas
December 22, 2002
Going to war in Afghanistan or keeping the peace in the Balkans can boost the bank accounts of some servicemembers.
Depending on where they are deployed, sailors, soldiers, airmen and Marines can be eligible for hundreds of dollars in added pay and tax exemptions.
How much more they’ll get depends heavily on one factor: location.
Being halfway around the globe from home doesn’t necessarily mean big bucks for people in uniform. But if they are part of a military operation or even in direct support of one, chances are Uncle Sam is willing to pay them more, and possibly give them a tax break.
Petty Officer 1st Class Brent Bloom, a disbursing clerk at Naval Air Station Sigonella, Sicily, is more than familiar with the ins and outs of tax-free status. During his four-year tour in Bahrain, he worked with thousands of pay records belonging to sailors and reservists who were exempt from federal taxes. He also didn’t pay federal taxes while there.
Bahrain is just one of about 270 areas that qualified for some type of extra pay or tax exemption. Bloom said a servicemember could see significant increases in their salary if they are deployed to one of these “busy spots.”
“There are certain areas of the world where servicemembers are exempt from federal income tax and others that get hostile fire or hazardous-duty pay,” he said.
Countries on the list include Afghanistan, Bahrain, Bosnia and Kosovo. The list of areas and the types of pay benefits change regularly.
“People serving in the Philippines were entitled to hostile-fire pay for a while,” Bloom said. “The area was recently made a tax-free country, too.”
In some regions, it’s not the country but the specific area in which a person serves that qualifies him for tax-free status.
“Sailors who travel above the 39th parallel in the Ionian Sea will get tax-free status,” Bloom said.
Below that, they don’t.
It pays to stay
Being in the right place at the right time also can help out when a servicemember decides to stay in the military.
“A lot of people sell back excess leave or re-enlist while they are in a tax-free zone,” Bloom said.
The money received from selling excess leave normally would be taxed as income. So would any re-enlistment bonus. “Re-enlisting or selling leave in a tax-free zone not only makes any initial payment tax-free, but the installments paid later would be exempt, too,” Bloom said.
“All they have to do is be there one minute of one day and they’ll get the tax-free status for the whole month,” he added.
That rule also helps out if a person travels at the end of the month. Servicemembers who arrive in a tax-free area on Nov. 30 and leave on Dec. 1, for example, receive two months of the tax exemption.
Enlisted servicemembers on official orders serving in a Combat Zone Tax Exclusion area designated by the Department of Defense financial management regulations are exempt from federal income tax withholdings. Officers serving in the area are not completely exempt.
The highest enlisted pay grades — master chief petty officer of the Navy, chief master sergeant of the Air Force, sergeant major of the Army and sergeant major of the Marine Corps — receive a basic monthly salary of $5,382.90. Officers in a designated tax-free zone are exempt only from federal taxes based on that monthly income plus their hostile-fire pay and hazardous-duty pay. Anything they earn above that will be taxed.
Estimating how much money servicemembers will get paid when they enter a tax-free area is a bit tricky.
“You can’t compare your tax exemption to someone else’s. Everyone’s is different. It all depends on how many dependents you claim,” Bloom said. “The higher your exemptions are on your W-4, the less tax you have withheld from your paycheck. That means you’ll see less of an increase in your pay while deployed to a tax-free zone.”
Some deployments have added pay and allowances above and beyond the tax exemptions. Those serving in support of Operation Enduring Freedom also get hostile-fire pay, hazardous-duty pay and family separation allowance.
In Afghanistan, soldiers are finding that their pay is significantly increased.
“I’ve saved over $4,000,” said Spc. Jeremy Reyes. The communications specialist assigned to the 307th Engineer Battalion, 82nd Airborne Division in Bagram estimates his paycheck is $800 a month more than it normally would be at Fort Bragg, N.C.
While the extra money is nice, it’s not enough of a reason for Reyes to stay on longer, but it is for some of his fellow soldiers.
“I’ve got friends who are doing that [extending in Afghanistan], but I want to go home,” he said. “I’ve done my part.” Reyes was scheduled to leave in mid-February, but now he hopes to be home for Christmas.
Other soldiers find that the financial burden of a deployment makes the added pay a necessity. Sgt. Kelvin Spencer, a cook and shift leader assigned to Headquarters, Headquarters Company, 82nd Airborne Division in Bagram, figures he’s making at least $400 more a month being deployed, though he wishes it were more.
“The extra $400 a month is nice,” Spencer said, “but it’s definitely not enough when you are deployed. You still have the same bills, if not more.”
Even though Spc. Lawrence Cushionberry isn’t getting the family separation pay that his married co-workers are getting in Afghanistan, he still makes about $500 more a month while assigned to the 82nd Military Police Company, 82nd Airborne Division in Afghanistan.
“I kind of wish I was married,” he said with a laugh, “so I can get separation pay,” he said.
U.S. forces in Bosnia may not get as much money as their compatriots in Afghanistan, but many find the extra pay to be helpful on the home front.
“It’s nice for the fact that I’m a single parent,” said Spc. Leon Phillips of Company C, 1st Battalion, 109th Infantry Regiment. His deployment to Eagle Base, Bosnia and Herzegovina, keeps him away from home, but the $300 extra a month he gets for being there is put to good use. “That extra money is good to send home to my two children.”
“My unit got extended for six extra weeks. It’s six extra weeks that Uncle Sam is not taking taxes from my family,” said Sgt. 1st Class Carl Bjornstal of 13th PSYOPS Company in Bosnia and Herzegovina. The Wisconsin native estimates that he’s getting $200 more a month while downrange. “It’s a good break taxwise for us. Military pay is a lot higher [than civilian pay at home]. It’s really good for me this year.”
In Kosovo, peacekeepers feel the extra money is just part of the mission.
“I plan to save $1,000 a month,” said Pfc. Nicholas Belanger of the 1st Infantry Division, 82nd Engineers, Charlie Company. He plans to buy a new vehicle after his Kosovo deployment.
“I think we deserve it; we sure earn it. I think it’s a good deal for coming here six months.”
— Sean Cobb in Kosovo, Kevin Dougherty in Afghanistan and Ivana Avramovic in Bosnia contributed to this report.
Special allowances you can receive
The Defense Department offers a number of categories of special pay for servicemembers who are deployed in times of conflict, as well as an income tax exemption. The information below is a summary — the rules that govern these payments are complex, as are the charts that will tell you who gets what, where, when, and why. For complete details, see Military Pay Policy and Procedures — Active Duty and Reserve Pay www.dtic.mil/comptroller/fmr/07a/index.html
Family Separation Allowance (FSA): This allowance is payable only to members with families. There are two types of FSA — Type I (equivalent to BAQ-S) and Type II ($100 per month). A member may be entitled to both types simultaneously.
The purpose of Type I FSA is to pay a member for added housing expenses resulting from enforced separation from dependents. It is not payable to members permanently assigned to a duty station in Hawaii, or usually to members assigned to any duty station under permissive orders.
FSA Type I is payable in a monthly amount equal to the basic allowance for quarters (BAQ) that would be payable to a member without dependents in the same pay grade.
FSA Type II is a $100-per-month allowance given to members with dependents who are on temporary additional duty for more than 30 days continually, or aboard a ship away from homeport continuously for more than 30 days.
Hazardous Duty Incentive Pay (HDIP): There are several categories of HDIP, including Flight Deck Hazardous Duty Incentive Pay, Crew Member Flight Pay, Non-crew Member Flight Pay, Parachute Duty Pay (“jump pay”), Demolition Duty Pay, Experimental Stress Duty Pay, Toxic Fuels (or Propellants) Duty Pay, Toxic Pesticides Duty Pay, Dangerous Viruses (or Bacteria) Lab Duty Pay, and Chemical Munitions Pay.
HDIP is generally paid at a rate of $150 per month to both officers and enlisted members whose orders require them to participate in “frequent and regular” duties considered unusually arduous or hazardous.
HDIP is prorated, which means most members get $3.33 for each day they work in an HDIP category if they aren’t there for an entire month.
Hardship Duty Pay (HDP): HDP is payable when a member is performing either specific missions (HDP-M) or is assigned to designated locations (HDP-L).
Hardship Duty Pay-M is $150 per month regardless of pay grade.
HDP-L also is payable at rates the Pentagon sets for each area, but can’t exceed $150 per month.
A version being phased out, HDL Pay for Certain Places, is payable only to enlisted members. HDP-L (CP) recipients should check the Web site for more information.
A servicemember can receive both HDP-M and HDP-L simultaneously.
Hostile Fire Pay (HFP): A $150-per-month entitlement payable when a servicemember is subjected to hostile fire or the explosion of a hostile mine, or when he is on duty in an area in close proximity to a hostile fire incident and in danger of hostile fire or mines. Members who are injured or wounded by hostile fire, a mine explosion, or any other hostile action, and the survivors of servicemembers killed under those conditions, also will get HFP.
A member will get a month’s worth of HFP even if he was assigned to a designated HFP area for just a single day.
Imminent Danger Pay (IDP): Servicemembers qualify for $150 per month in imminent danger pay if they are on duty outside the United States area and are serving ashore, aboard a ship, or aloft in an aircraft in an area subject to physical harm or imminent danger due to wartime conditions, terrorism, civil insurrection or civil war (see graphic for a list of current IDP areas).
Servicemembers get a month’s worth of IDP even if they were assigned to a designated IDP area for just a single day.
— Compiled by Lisa Burgess, Stars and Stripes