Being assigned to or working in a combat zone triggers another tax advantage. Earnings received while in the combat zone are excluded from taxable income. This exclusion is unlimited for enlisted members and warrant officers and is limited to $7368.30 per month in 2009, for officers. If you spend a single qualifying day in the combat zone, your pay for the entire month is excluded from taxable income.

Bonuses and special pays are also excluded from taxable income if within the previously stated limitations and earned in the same month in which you served in a combat zone. For example, an enlisted reenlistment bonus is excluded from taxes if the member reenlists in the same month in which the member served in a combat zone. Since there is no limitation on amounts excluded for enlisted members, the entire reenlistment bonus would be excluded. As another example, an officer's flight pay would also be excluded from taxable income, but only up to the point which basic pay and the flight pay do not exceed the maximum enlisted pay amount. The Career Status Bonus received by members who may choose between High-3 and CSB/REDUX retirement plans and who elect the CSB/REDUX retirement plan also falls in this category. To be considered "earned" in the combat zone, the CSB/REDUX election must be accepted by the Service and considered final in the month in which the member was in the combat zone.