Bahrain's Tax Exemption Status For Military: What's The Latest?

Military personnel serving in combat zones can exclude portions of their pay from taxable income. A combat zone is defined as an area designated by the President through an executive order where the Armed Forces are engaging in or have engaged in combat. The Arabian Peninsula, including Bahrain, was designated as a combat zone beginning on January 17, 1991. As such, military members serving in Bahrain during this period may be eligible for certain tax exemptions. However, it's important to note that tax laws and regulations can change over time, and individuals should consult with tax professionals or relevant government sources for the most up-to-date information regarding tax exemptions for military service in Bahrain.

Bahrain is part of the Arabian Peninsula combat zone

Military personnel serving in combat zones can exclude portions of their pay from their taxable income. This includes active-duty pay, imminent-danger pay, hostile-fire pay, re-enlistment bonuses, and pay for accrued leave.

As a result of this designation, military personnel serving in Bahrain can take advantage of certain tax benefits. These benefits include excluding their active-duty pay, imminent-danger pay, hostile-fire pay, re-enlistment bonuses, and pay for accrued leave from their taxable income. It is important to note that these benefits only apply if the individual served in the combat zone for at least one day during the month.

In addition to the tax benefits for those serving in the Arabian Peninsula combat zone, there are also benefits for those serving in direct support of military operations in the region. These individuals may also qualify for the combat zone tax exclusion if they receive special pay for duty subject to hostile fire or imminent danger as certified by the Department of Defense.

Military pay in combat zones is tax-free

According to the IRS, a combat zone is any area designated by the President of the United States through an executive order as a region in which the Armed Forces are engaging or have engaged in combat. The designation of a combat zone usually occurs on the dates specified by the President in the executive order.

Enlisted personnel, warrant officers, and commissioned warrant officers can exclude the following from their income:

• Active duty pay earned in any month served in a combat zone
• Imminent danger/hostile fire pay
• A reenlistment bonus if you reenlisted in a month you served in a combat zone
• Pay for selling back leave in any month served in a combat zone
• Some other pay received in a combat zone

The amount of pay subject to the combat zone tax exclusion each month for O-1 and above is limited to the monthly pay for the senior E-9 of each branch, plus the monthly hostile fire pay amount. For 2020, this amount was $8,747.50.

If you serve in a combat zone for at least one day during a month, you are eligible for the combat zone exclusion for that entire month. This includes any periods of absence from duty due to illness, wounds, or leave. Service members are also considered to be serving in a combat zone if they become prisoners of war or are missing in action, as long as that status is maintained for military pay purposes.

Hospitalization due to wounds, disease, or injury incurred while serving in a combat zone is also excluded from taxation, even if the hospitalization occurs after leaving the combat zone.

It is important to note that military service in a combat zone does not qualify for the tax exclusion if the service member is on leave from a duty station outside the zone, passing through the zone during travel, or present in the zone solely for personal convenience.

Combat zones are designated by the US President

Military personnel deployed in combat zones can take advantage of tax-free pay benefits. A combat zone is defined as an area designated by the US President through an executive order as a place where the US Armed Forces are engaging in or have engaged in combat. The Internal Revenue Service (IRS) recognises these combat zones and offers tax benefits to those who serve in them.

The IRS definition of a combat zone is as follows:

> Any area the President of the United States designates by Executive order as an area in which the U.S. Armed Forces are engaging or have engaged in combat. An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive order.

The US President can designate a combat zone through an executive order. For example, Executive Order No. 13239 designated Afghanistan and its airspace as a combat zone beginning on September 19, 2001. Executive Order No. 13119 designated the Federal Republic of Yugoslavia (Serbia/Montenegro) and the Ionian Sea (north of the 39th parallel) as a combat zone beginning on March 24, 1999.

The US Armed Forces members who serve in combat zones can exclude portions of their pay from their taxable income. This includes active-duty pay, imminent-danger pay, hostile-fire pay, re-enlistment bonuses, pay for accrued leave, and awards or achievement pay made during a month served in a combat zone.

It is important to note that the tax benefits for military personnel serving in combat zones may vary depending on the specific circumstances and regulations.

Military personnel can exclude certain pay from their income

The following types of income can be excluded:

• Active-duty pay earned during any month served in a combat zone
• Imminent danger/hostile fire pay
• Reenlistment bonus if the reenlistment occurred during a month served in a combat zone
• Pay for selling back leave accrued while in a combat zone
• Student loan repayments associated with months served in a combat zone
• Awards and other financial incentives for submissions made while in a combat zone

It is important to note that military pay earned in a combat zone is still subject to Social Security and Medicare taxes and will appear on your W-2. Additionally, there are certain situations where military service does not qualify as service in a combat zone, such as when an individual is on leave or passing through the zone during travel.

Military members can receive imminent danger/hostile fire pay

Military members can receive Imminent Danger Pay (IDP) and Hostile Fire Pay (HFP) when they are deployed in hazardous areas. These benefits are available to those who are subjected to hostile fire, explosion of hostile mines or other hostile action and are:

• Performing duty in a hostile fire area
• Exposed to a hostile fire event
• On duty during a month in an area in which a hostile event occurred that placed them in grave danger of physical injury
• Killed, injured, or wounded by hostile fire, explosion of a hostile fire event

IDP and HFP are prorated for partial months, meaning that military members are only paid for the time they are in a designated area. It is not possible to receive both IDP and HFP at the same time. The monthly rate for both is $225, but service members who are exposed to a hostile fire event or mine explosion are eligible to receive the full monthly amount.

IDP is paid when a military member is assigned to a designated IDP area. HFP is determined by a commander and is based on whether a service member is subjected to hostile fire or mine explosions, is in an area near hostile fire or mine explosions that endanger them, or is killed, injured or wounded by hostile fire, mines or any hostile action.

Both IDP and HFP are taxable unless the military member is serving in a designated combat zone or support area.

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