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Combat pay

Pay received by members of the U.S. Armed Forces and support personnel in combat zones, including peace-keeping efforts. Military pay received by enlisted personnel serving in combat or designated peace-keeping efforts is tax-free. Officer pay is tax-free up to the maximum pay for enlisted personnel (plus imminent danger/ hostile fire pay), an amount that increases each year. Although tax-free, combat pay may now be counted as compensation when determining whether the taxpayer can contribute to an IRA or Roth IRA.