Janice Lozano
Non-taxable combat pay is a stipend paid to military personnel serving in hazardous zones in addition to their base pay. It is excluded from gross income but is considered in the need analysis for federal student aid applications. Student loan repayments can be excluded from income tax for the months served in a combat zone. For example, if a year of service is required to earn the repayment and six months are served in a combat zone, half of the repayment income can be excluded.
Explore related products
What You'll Learn
Student loan repayments for those who served in combat zones
Student loan repayments can be excluded from income for those who have served in combat zones. This exclusion applies to the months served in a combat zone, including partial months of service. For example, if a year is required to earn the repayment and you serve six of those months in a combat zone, you can exclude half of the repayment income.
Combat pay is a stipend or fixed sum of money given to active members of the US Armed Services serving in hazardous zones. This pay is excluded from gross income but is still considered during the need analysis for federal student aid purposes. It is reported as untaxed income on Worksheet B of the FAFSA (Free Application for Federal Student Aid). It should also be included in the earned income figures reported on the FAFSA. The amount of combat pay is listed in Box 12 (Q) of the W-2 statement.
For enlisted persons and warrant officers, combat pay is entirely nontaxable, and they should report zero for combat pay. For commissioned officers, combat pay in excess of the highest enlisted person's pay (plus imminent danger/hostile fire pay) is taxable. The tax exclusion applies to married personnel as well: if both spouses are military and served in a combat zone, they may both receive the tax exclusion for the months they were present. If only one spouse served in a combat zone, that spouse may receive the tax exclusion for the months they were present.
If you are on active duty, the repayment of your loans will be deferred for an extended period after your return from duty. This can help with loan repayment while military members readjust to life after active duty and reduce the chances of delinquent loans.
AmeriCorps VISTA: Student Loan Repayment and You
You may want to see also
Explore related products
Combat pay exclusions for commissioned officers
For commissioned officers, the combat pay exclusion for any month is limited to the total of the highest enlisted person's pay (plus imminent danger/hostile fire pay). This limit doesn't apply to commissioned warrant officers.
To calculate the taxable amount, use the total combat pay from the leave and earnings statements and subtract the untaxed portion, which is reported in Box 12 of the W-2 form with code Q.
Combat pay exclusions include:
- Military pay for each month present in a combat zone
- Military compensation earned during hospitalization (in or out of a combat zone) due to wounds, disease, or injury incurred in a combat zone. This is subject to a two-year limitation.
- Military pay for those who are hospitalized after leaving a combat zone. The hospitalization must be due to a wound, disease, or injury incurred while serving in a combat zone.
Combat pay is a bonus paid to military service personnel who are serving in regions designated as hazard zones. This additional pay is generally not subject to federal income tax, although Social Security and Medicare taxes are deducted.
Eradicating Student Loan Debt in 2 Years: A Guide
You may want to see also
Explore related products
Combat pay and federal student aid
Combat pay is a stipend or a fixed sum of money paid to military service personnel serving in hazardous zones. It is excluded from gross income and is non-taxable for enlisted persons and warrant officers. However, for commissioned officers, combat pay in excess of the highest enlisted person's pay is taxable.
When it comes to federal student aid, combat pay is still considered during the needs analysis for federal student aid applications, such as the FAFSA (Free Application for Federal Student Aid). While it is reported as untaxed income on Worksheet B of the FAFSA, it is also included in the earned income figures reported. This means that combat pay can impact your financial aid eligibility and the amount of aid you receive.
For students who are veterans or active military members, there are additional considerations. Loan repayment terms may be deferred for an extended period after returning from active duty, and there are scholarships specifically designated for those serving in the Armed Services. Additionally, if you are no longer on active duty, you can request that the school use "professional judgment" to exclude combat pay from your income calculation, which may increase your eligibility for financial aid.
It is important to accurately report combat pay on your FAFSA to ensure you receive the correct amount of financial aid. This may include reporting zero for combat pay if it is non-taxable or entering the taxable amount if you are a commissioned officer.
Army Student Loan Forgiveness for Officers: What's the Deal?
You may want to see also
Explore related products
Taxable and untaxable combat pay
For enlisted persons and warrant officers, combat pay is entirely non-taxable, and they should report zero for combat pay or special combat pay. This includes imminent danger/hostile fire pay, which can also be excluded. Non-taxable combat pay is usually shown on a W-2 form in Box 12 with code Q.
For commissioned officers, combat pay in excess of the highest enlisted person's pay (plus imminent danger/hostile fire pay) is taxable. To calculate the taxable amount, use the total combat pay from the leave and earnings statements and subtract the untaxed portion, which is reported in the same way as for enlisted persons and warrant officers. This limit doesn't apply to commissioned warrant officers.
Combat pay is a monthly stipend or fixed sum of money given to active members of the U.S. Armed Services who serve in certain hazardous areas. It is excluded from gross income but is still considered during the need analysis for federal student aid purposes. It is reported as untaxed income on Worksheet B of the FAFSA (Free Application for Federal Student Aid) and should also be included in the earned income figures reported on the FAFSA.
Military pay earned while in a combat zone is subject to Social Security and Medicare taxes and will appear on a W-2 form. If you served in a combat zone for part of a month and were hospitalized for the rest of the month due to wounds, disease, or injury incurred while serving in that zone, you are entitled to the exclusion for the entire month. This exclusion does not apply if the hospitalization extends beyond two years from the last month of presence in a combat zone.
Student Loan Freedom: A Step-by-Step Guide for Beginners
You may want to see also
Explore related products
Combat pay and loan repayment deferrals
For enlisted persons and warrant officers, combat pay is entirely non-taxable, and they should report zero for combat pay or special combat pay. However, for commissioned officers, combat pay in excess of the highest enlisted person's pay (plus imminent danger/hostile fire pay) is taxable. This limit doesn't apply to commissioned warrant officers.
Combat pay is a monthly stipend or a fixed sum of money given to active members of the US Armed Services serving in certain hazardous areas. It is a bonus paid to military service personnel serving in regions designated as hazard zones. While combat pay is excluded from gross income, it is still considered during the need analysis for federal student aid purposes. It is reported as untaxed income on Worksheet B of the FAFSA (Free Application for Federal Student Aid) and should be included in the earned income figures reported on the FAFSA. The amount of combat pay is listed in Box 12 (Q) of the W-2 statement.
If you are on active duty, the repayment of your loans will be deferred for an extended period after your return from duty. This can help with loan repayment while military members readjust to life after active duty and reduce the chances of loan delinquency.
For students who have no income other than combat pay and housing/subsistence allowances, they will likely qualify for automatic zero EFC (Expected Family Contribution).
Commuter Students: Avoid Fees, Save Money
You may want to see also
Frequently asked questions
Non-taxable combat pay is a stipend or fixed sum of money given to members of the U.S. Armed Services for their service in hazardous zones in addition to their base pay. It is excluded from gross income but is still considered during the need analysis for federal student aid purposes.
Combat pay is reported as untaxed income on Worksheet B of the FAFSA. It should also be included in the earned income figures reported on the FAFSA. The amount of combat pay is listed in Box 12 (Q) of the W-2 statement.
If you served in a combat zone for the year of service required to earn the repayment, you can exclude part of the repayment associated with the months you were present in a combat zone. For example, if a year is required to earn the repayment and you serve six of those months in a combat zone, you can exclude half of the repayment income.
Enlisted persons and warrant officers are eligible for non-taxable combat pay. Commissioned officers are eligible for non-taxable combat pay up to the highest enlisted person's pay, plus imminent danger/hostile fire pay.
