Is a bonus still tax free if you reenlist in theater but it's paid when you return to the US?

SGT Private RallyPoint Member — Wed, 27 Feb 2019 17:21:14 -0500

Hello Rallypoint,
I was deployed June 2017 - March 2018 and re-enlisted 15FEB2018 in Afghanistan with a 3 yr re-enlistment. My ETS was 14FEB2019. I signed a contract with a $6K bonus while in theater. I recently received the LES for the bonus (which I knew would be paid within 30 days of the new contract starting), but is being state and federally taxed. I initially understood bonuses being awarded overseas to be tax free (that was what the retention person said at least and what was explained by multiple people to be), but is this actually the case? I was reading what DFAS has posted and it makes it seem like only if the bonus is paid while overseas is it tax free? Or is this an error on DFASs part? I intend on calling them as, my impression, a bonus awarded during a reenlistment while overseas, even if it doesn't pay out then, is still eligible to be tax free?

Response by 1SG Private RallyPoint Member made Feb 27 at 2019 6:20 PM

1SG Private RallyPoint Member — Wed, 27 Feb 2019 18:20:26 -0500

Some folks on here more current than I , but I think you are correct. I recall units in Germany rotating Soldiers to Kuwait in 2002, to permit them to reenlist for that purpose, but time may have fogged my memory.
I found this:

Bonuses and special pays are also excluded from taxable income if within the previously stated limitations and earned in the same month in which you served in a combat zone. For example, an enlisted reenlistment bonus is excluded from taxes if the member reenlists in the same month in which the member served in a combat zone. Since there is no limitation on amounts excluded for enlisted members, the entire reenlistment bonus would be excluded.
https://militarypay.defense.gov/Pay/Tax-Information/CZTE/

Combat Zone Tax Exclusions

Military Pay and Benefits Website sponsored by the Office of the Under Secretary of Defense for Personnel and Readiness

Response by SFC Private RallyPoint Member made Feb 27 at 2019 7:22 PM

SFC Private RallyPoint Member — Wed, 27 Feb 2019 19:22:20 -0500

Your bonus should be taxed free, it’s suppose to go off of your location at the time of the reenlistment, which was in theater, not the location you’re in at the time of payment because you nor retention have no control over when finance process the transaction so they suppose to use the date you reenlisted. I hope this helps...Good Luck to you

Response by SFC Private RallyPoint Member made Feb 27 at 2019 8:06 PM

SFC Private RallyPoint Member — Wed, 27 Feb 2019 20:06:44 -0500

Bonuses paid overseas are not tax-free, only when you reenlist in a combat tax exclusion Zone is your bonus tax free.
If your bonus my taxes removed when they were not supposed to be, you can go to finance add file to have the rest of it paid to you