Combat Zone Exclusion: Military Taxes (2025 IRS Guide)
This guide covers “Combat Zone Exclusion” within military taxes. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.
Adapted from Publication 3 (2025), Armed Forces' Tax Guide, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.
Combat Zone Exclusion
Tip:
Combat zone exclusion and combat zone pay are also known as combat zone tax exclusion and combat zone compensation, respectively.
How Much of My Combat Zone Pay Can I Exclude?
Enlisted member, warrant officer, or commissioned warrant officer.
If you are an enlisted member, warrant officer, or commissioned warrant officer, none of your combat zone pay is included in your income for tax purposes.
Commissioned officers (other than commissioned warrant officers).
If you are a commissioned officer (other than a commissioned warrant officer), there is a limit to the amount of combat zone pay you can exclude. The amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. For 2025, the applicable amount is $10,983 per month (that is, $10,758 for the highest enlisted pay + $225 for imminent danger pay).
Earned income election.
Though your combat zone pay is excluded from income, you can elect to include it in income in figuring your EIC. See Can I treat my nontaxable combat zone pay as earned income? under Earned Income Credit, later.
How Do I Report the Combat Zone Exclusion?
Ordinarily, you don't have to do anything for this exclusion to apply. The exclusion will be reflected on your Form W-2. The wages shown in box 1 of your 2025 Form W-2 shouldn't include military pay excluded from your income under the combat zone exclusion provisions. If it does, you will need to get a corrected Form W-2 from your finance office. You can't exclude as combat zone pay any wages shown in box 1 of Form W-2.
What Is Combat Zone Pay?
Tip:
Combat zone compensation is also known as combat zone pay.
Combat zone pay is pay received by a member of the U.S. Armed Forces who serves in:
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A combat zone as designated by the President in an Executive order (see Combat Zone Defined, later);
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A qualified hazardous duty area designated by Congress while receiving hostile fire pay or imminent danger pay in accordance with 37 U.S.C. 351 (see Serving in a Combat Zone, later); or
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An area outside the combat zone or qualified hazardous duty area when the DoD certifies that such service is in direct support of military operations in a combat zone or qualified hazardous duty area, and the member receives hostile fire pay or imminent danger pay (see Serving outside combat zone considered serving in a combat zone, later).
The month for which you receive the pay must be a month in which you either:
Partial month service is treated as full month of service.
If you serve in a combat zone for any part of 1 or more days during a particular month, you are entitled to a combat zone exclusion for that entire month.
Are my retirement pay and pensions treated as combat zone pay?
Retirement pay and pensions don't qualify for the combat zone exclusion.
Tip:
Combat Related Special Compensation (CRSC) is a benefit awarded to certain retired veterans with combat-related disabilities. CRSC is excluded from income.
Combat Zone Defined
A combat zone is any area the President of the United States designates by Executive order as an area in which the U.S. Armed Forces are engaging or have engaged in combat. An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive order. To date, the Afghanistan area, the Kosovo area, and the Arabian Peninsula have been designated as combat zones. Combat zone tax benefits have been designated by Congress for the Sinai Peninsula of Egypt under certain circumstances. Though the former Yugoslavia is no longer treated as a combat zone, certain benefits may still be available to those who served in that area at that time. Each of the combat zones, the Sinai Peninsula, and the former Yugoslavia area are discussed below.
Serving outside combat zone considered serving in a combat zone.
Military service outside a combat zone is considered to be performed in a combat zone if:
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The DoD designates that the service is in direct support of military operations in the combat zone, and
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The service qualifies you for special military pay for duty subject to hostile fire or imminent danger under 37 U.S.C. 351.
Military pay received for this service will qualify for the combat zone exclusion if all of the requirements discussed under Service Eligible for Combat Zone Exclusion, later, other than service in a combat zone, are met and if the pay is verifiable by reference to military pay records.
The Afghanistan area.
By Executive Order No. 13239, Afghanistan (and the airspace above) was designated as a combat zone beginning September 19, 2001.
The following countries were certified by the DoD for combat zone tax benefits due to their direct support of military operations in the Afghanistan combat zone.
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Jordan and Pakistan (as of September 19, 2001).
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Djibouti (as of July 1, 2002).
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Yemen (as of April 10, 2002).
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Somalia and Syria (as of January 1, 2004).
Note: For the Philippines only, the personnel must have deployed in conjunction with Operation Enduring Freedom or Operation Freedom’s Sentinel supporting military operations in the Afghanistan combat zone.
The Kosovo area.
By Executive Order No. 13119 (EO 13119), the following locations (including the airspace above) were designated as a combat zone beginning March 24, 1999.
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Federal Republic of Yugoslavia (Serbia/Montenegro).
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Albania.
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Kosovo.
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The Adriatic Sea.
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The Ionian Sea—north of the 39th parallel.
The Arabian Peninsula.
By Executive Order No. 12744, the following locations (and the airspace above) were designated as a combat zone beginning January 17, 1991.
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The Persian Gulf.
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The Red Sea.
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The Gulf of Oman.
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The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude.
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The Gulf of Aden.
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The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates.
The following countries were certified by the DoD for combat zone tax benefits due to their direct support of military operations in the Arabian Peninsula combat zone.
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Jordan (as of March 19, 2003).
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Lebanon (as of February 12, 2015).
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Turkey east of 33.51 degrees east longitude (as of September 19, 2016).
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Israel (as of March 16, 2023). The land area of Israel includes Jerusalem and the Golan Heights and excludes the West Bank and Gaza Strip.
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The land area or adjacent littoral waters of the Cooperative Security Location of Manda Bay, Kenya (as of September 26, 2023).
Sinai Peninsula.
Section 11026 of Public Law 115-97 designates the Sinai Peninsula of Egypt as a qualified hazardous duty area that is treated as if it were a combat zone. This designation generally applies for the period beginning June 10, 2015. For more information about amending prior-year returns to take advantage of the benefits associated with this designation, see the Instructions for Form 1040-X.
The former Yugoslavia area.
Section 1 of Public Law 104-117 designated the following locations as qualified hazardous duty areas that were treated as if they were combat zones.
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Bosnia and Herzegovina.
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Croatia.
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Macedonia.
Service Eligible for Combat Zone Exclusion
As noted earlier, pay eligible for the combat zone exclusion must have been received for a month in which you either served in a combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. We discuss these below. Also see Serving outside combat zone considered serving in a combat zone, earlier, under Combat Zone Defined.
Serving in a Combat Zone
You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone.
Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as they keep that status for military pay purposes.
Hospitalization as a Result of Wounds, Disease, or Injury Incurred While Serving in a Combat Zone
Hospitalized while serving in a combat zone.
If you are hospitalized while serving in a combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary.
Example.
You are hospitalized for a specific disease in a combat zone where you have been serving for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. The disease is presumed to have been incurred while you were serving in the combat zone. On the other hand, if the incubation period of the disease is 1 year, the disease wouldn't have been incurred while you were serving in the combat zone.
Hospitalized after leaving a combat zone.
In some cases, the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you weren't hospitalized until after you left. In that case, you can exclude military pay earned while you are hospitalized as a result of the wound, disease, or injury.
Example.
You were hospitalized for a specific disease 3 weeks after you departed the combat zone. The incubation period of the disease is 2 to 4 weeks. The disease is presumed to have been incurred while serving in the combat zone.
Time limit on combat zone exclusion for pay received while hospitalized.
If you are hospitalized, you can't exclude any military pay received for any month of service that begins more than 2 years after the end of combat activities in the combat zone. This pay won't be combat zone pay.
Nonqualifying Presence in a Combat Zone
None of the following types of military service qualify as service in a combat zone.
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Presence in a combat zone while on leave from a duty station located outside the combat zone.
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Passage over or through a combat zone during a trip between two points that are outside a combat zone.
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Presence in a combat zone solely for your personal convenience.
Using the guidance
Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.
Sources and further reading
- Publication 3 (2025), Armed Forces' Tax Guide: Combat Zone Exclusion — Internal Revenue Service; 2025 edition.
The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.