Some Minnesota National Guard troops recently got their promised bonus for extended service in Iraq were shocked to learn that more than 40% of their bonus was eaten up in taxes. Efforts were made in the Minnesota Legislature to rescind state income tax on this bonus pay, but the IRS would not be deprived of their whack. Why doesn’t Congress just exempt military pay received in combat from federal income tax?
“Some Minnesota National Guard troops recently got their promised bonus for extended service in Iraq were shocked to learn that more than 40% of their bonus was eaten up in taxes.”
If it was for actual “service in Iraq”, it would almost certainly be Title 10 money, which WOULD ordinarily be exempt. However, such money isn’t normally considered “bonus” money, but rather pay earned while serving in a combat zone.
Based solely on the above, my suspicion is that the money came from the State of Minnesota in their State Guard status or under Title 32, which means it’s not covered under the combat zone exemption.
Colonel, USAFR
>Why doesn’t Congress just exempt military pay received in combat from federal income tax?
It’s supposed to be.
After I was deployed I got all the taxes on combat-zone pay returned. {It is another scam by the Government though, amounting, roughly, to interest-free loans.}
“Why doesn’t Congress just exempt military pay received in combat from federal income tax?”
Good question. Why haven’t they been doing this all along? The Congress & Obama (who made $5 MILLION last year) get their raises, keep their special medical packages, yet some of our military qualify for food stamps. Sick, sick, sick.