Can someone who knows from actual personal experience answer the following questions for me so I can plan my finances for the year. I am trying to determine exactly what parts of my pay are tax-exempt while I am deployed. If you can provide a source for further information that would also be helpful. Basic Pay--Clearly tax exempt for any month in which I am deployed at least one day BAH and BAS--Always tax exempt VSP- ? BCP- ? Hostile Fire pay- I'm pretty sure this is tax exempt. Family Separation pay- ? Per Diem- ? Since the pay of the senior enlisted person is more than my combined Basic Pay, VSP, BCP, hostile fire pay, family separation pay, and per diem, can I exclude a portion of my ASP/ISP to make up the difference? Under what circumstances do deployed physicians earn "hardship pay," if any? Also, for those who participated in the Savings Deposit Program, what did you do to maximize that benefit while deployed? I understand you can send in a check the day you arrive in theater for an amount up to your monthly pay, then repeat one month later with $10K minus one month's pay to earn as much as possible on it. (That way one can defer your tax-exempt pay into the TSP and still contribute to the SDP from your reserves at home.) Can anyone explain how this is done exactly? Pasted below is a segment taken from the IRS Publication 3: If you are a member of the U.S. Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. This pay is generally referred to as "combat pay." You do not actually need to show the exclusion on your tax return because income that qualifies for the combat zone exclusion is not included in the wages reported on your Form W-2. (See Form W-2, later.) The month for which you receive the pay must be 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. You do not have to receive the excluded pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income. (Other officer personnel are discussed under Amount of Exclusion, later.) Active duty pay earned in any month you served in a combat zone. Imminent danger/hostile fire pay. A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. Pay for accrued leave earned in any month you served in a combat zone. The Department of Defense must determine that the unused leave was earned during that period. If you are a commissioned officer (other than a commissioned warrant officer), you can exclude your pay according to the rules just discussed. However, 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. http://www.irs.gov/publications/p3/ar02.html#d0e997 Here is some info I found on the SDP for those interested: .The Savings Deposit Program (SDP) allows Soldiers to deposit an amount up to their current ..unallotted pay into a government savings program that earns 10% annual interest, compounded ..quarterly. The program pays interest on amounts up to $10,000. . . Soldiers performing official duties in designated areas may participate in the program (see ..entitlements map on page 5). To be eligible, the Soldier must meet designated criteria for the ..area and the applicable contingency operation. Generally, Soldiers on orders contemplating ..duty for more than 30 days, can make their first deposit after arrival into the theater for up to ..the amount of that month's pay. Department of Defense Financial Management Regulation, ..Volume 7A, Chapter 51 outlines requirements for various contingency operations. Also, for ..more detail, take a look at our frequently asked questions at: ..https://www.266fc.hqusareur.army.mil.. .. . . Active component Soldiers may contribute through allotment (preferred method) or cash ..deposits (cash or negotiable instrument). Reserve component Soldiers may only contribute ..through cash or personal checks. Monthly deposits are ..limited.. to an amount up to net ..unallotted current pay and allowances. Agents with a power of attorney authorizing them to ..start, stop or change allotments may start a SDP allotment on behalf of the deployed member ..once the deployment entitlements are showing in the Soldier's pay account. Agents with a ..power of attorney authorizing them to make investments on the Soldier's behalf may deposit ..cash, money orders, traveler's checks or cashier's checks. Agents may not make withdrawals ..from a SDP account. .