Is ASP taxable if you receive it on deployment/combat zone?
ASP pay
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Tax exempt is limited to the pay of the highest ranked enlisted in theatre, so almost always E9. Someone can correct me on the number but I think it's about $9000 per month. When I received my ASP in theatre as an O-3 about $2000 of it was tax exempt the rest pushed me over the threshold for the month and was taxable.
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There are two separate issues here - the estimated tax DFAS withholds from your pay, and the actual tax you pay when you file your tax return the following April.
When it comes to medical special and incentive pays the amount withheld at the time of payment is based on data you give to DFAS (exemptions) and whether or not you're in a combat zone. This amount is an estimate, and is never exactly correct. The IRS isn't involved in that calculation, they don't care, and you probably shouldn't care (much) either.
What actually matters is what goes on the tax return you file with the IRS. When that time comes, the combat zone tax exclusion is very simple: you get a deduction equal to the lesser of
1) all of your taxable .mil income for every month you were deployed
2) the base pay of the most-senior-enlisted-in-service times the number of months you were deployed
At the bottom of the first page of the military pay tables (pdf) there is this statement:
Most post-residency military doctors' monthly taxable pay exceeds that figure, so the CZTE is (presently) $7963.80 per month. If you spend one day in a month in a combat zone, you're entitled to the full month.
I was deployed from 25 Dec 2012 to 3 Aug 2013. When I file my 2013 tax return in April 2014, I'll be able to claim an 8 month CZTE, or a $63,710.40 deduction (8 x 7963.80). I received ASP while deployed, I'll receive ISP/MSP in October (not deployed), and I receive VSP and BCP every month. But in the end that timing really doesn't matter, because all the IRS sees is a $63,710.40 deduction.
The exclusion is UNLIMITED for enlisted members and warrant officers, so bonuses they get in combat zones are truly and completely tax free. For officers, the benefit is more limited. I think this is the source of the confusion - we're always hearing about enlisted members timing their re-enlistment to get their bonus tax free, but the rules are different for commissioned officers.
http://militarypay.defense.gov/pay/combatzone_exclusions.html
http://www.irs.gov/uac/Military-Pay-Exclusion-—-Combat-Zone-Service
When it comes to medical special and incentive pays the amount withheld at the time of payment is based on data you give to DFAS (exemptions) and whether or not you're in a combat zone. This amount is an estimate, and is never exactly correct. The IRS isn't involved in that calculation, they don't care, and you probably shouldn't care (much) either.
What actually matters is what goes on the tax return you file with the IRS. When that time comes, the combat zone tax exclusion is very simple: you get a deduction equal to the lesser of
1) all of your taxable .mil income for every month you were deployed
2) the base pay of the most-senior-enlisted-in-service times the number of months you were deployed
At the bottom of the first page of the military pay tables (pdf) there is this statement:
Most post-residency military doctors' monthly taxable pay exceeds that figure, so the CZTE is (presently) $7963.80 per month. If you spend one day in a month in a combat zone, you're entitled to the full month.
I was deployed from 25 Dec 2012 to 3 Aug 2013. When I file my 2013 tax return in April 2014, I'll be able to claim an 8 month CZTE, or a $63,710.40 deduction (8 x 7963.80). I received ASP while deployed, I'll receive ISP/MSP in October (not deployed), and I receive VSP and BCP every month. But in the end that timing really doesn't matter, because all the IRS sees is a $63,710.40 deduction.
The exclusion is UNLIMITED for enlisted members and warrant officers, so bonuses they get in combat zones are truly and completely tax free. For officers, the benefit is more limited. I think this is the source of the confusion - we're always hearing about enlisted members timing their re-enlistment to get their bonus tax free, but the rules are different for commissioned officers.
http://militarypay.defense.gov/pay/combatzone_exclusions.html
http://www.irs.gov/uac/Military-Pay-Exclusion-—-Combat-Zone-Service
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From someone who was in a combat zone when I got both ASP and ISP, the short answer is yes.
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I am deployed right now and got my July 1 bonus but the normal amount of tax was taken out. I will still be here for the October bonus. Assuming they still take out the full amount, should I be talking to finance about it or just wait to file my return next year?
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Never mind, I read the helpful post above and figured it out. I'll just get it back in my tax return. It would, however, be nice to have that money NOW instead of waiting several more months.
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Anyone else not receive ASP yet? (I'm Air Force). I came from a civilian residency program and have been on active duty for over 2 months now, yet have not received ASP or VSP. I called the special pay phone number, 210-565-2377, multiple times, yet no one ever answers the phone. I left a few voice mails but was never called back. I also emailed [email protected], but again have not received a response. Is there someone else I should contact?
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I had an issue with this before. Here is what I recommend:
1. Make sure the ASP request was created properly and sent up the chain.
2. If that was done, you should have the original in hand.
3. For the Navy there is a specific website you will email a scanned copy of the ASP request. (Not sure about other services, maybe it is similar).
4. If all of this was done your only option is to continue to try and call them and ask them about the status.
