Being a member of the Armed Services has certain benefits. One is that it qualifies you for combat pay.
The combat pay comes into play if you are subject to or wounded by hostile fire or explosive mines, on duty on foreign soil, and subject to the threat of physical harm or imminent danger due to civil unrest, civil war, terrorism, or wartime conditions.
Combat Pay in FAFSA
What is Combat Pay?
Combat pay is a bonus paid to military service personnel who are serving in regions that are designated hazard zones. The additional pay is generally not subject to federal income tax although Social Security and Medicare taxes are deducted.
But it is important to note; combat pay is factored into applications for student aid made through the FAFSA. The income made by men in the armed forces can simply be split into two namely; excludable and non-excludable.
Excludable Income:
This income related to military compensation is said to be excludable. As they need not be accounted for in FAFSA. They include:
- Basic Pay – This is paid for every month you are present in a combat zone.
- Reenlistment or Continuation Bonuses – This income can be excluded if the reenlistment or the execution of the contractual agreement for continued service occurred while present in a combat zone.
- School Loan Repayments – This allows you to exclude part of the repayment associated with the months you were present in a combat zone. For example, if a year is required to earn the repayment and you serve six of those months in a combat zone, you can exclude half of the repayment income.
- Imminent Danger/Hostile Fire Pay – You can exclude all of this income.
- Leave Benefits – You can exclude income from selling acquired leave earned while in a combat zone.
- Awards and other Financial Incentives – You can exclude associated income for submissions made while in a combat zone.
Non- Excludable Income:
Military pay earned while in a combat zone is subject to Social Security and Medicare taxes and will appear on your W-2.
However, in some cases, combat pay may be written as zero. in other cases, combat pay is accounted for in the FAFSA application. Let us look at some of the ways to answer questions on how FAFSA works regarding combat pay.
Tips On How to Answer A Question Regarding Combat Pay In FAFSA Application
How much combat pay or special combat pay did you report in your adjusted gross income?
For students: For members of the enlisted ranks and warrant officers, you can fill in zero combat pay because combat pay is untaxable within that range while commissioned officers may fill in the excess of the combat pay of the highest enlisted officer (sergeant major).
Read this: What does FAFSA stand for? (Quick tips and info)
How much combat pay or special combat pay did you report in your Adjusted Gross Income?
For parents: Enter the total amount of taxable combat pay or special combat pay that you (and if married, your spouse) received that year. Only enter the amount that was taxable and included in the adjusted gross income.
Parents’ Taxable Combat Pay Reported in Adjusted Gross Income?
The response should indicate the total amount of taxable combat pay or special combat pay that the student’s parents received in that year. Only enter the amount that was taxable and included in the adjusted gross income.
Combat Pay in FAFSA
How to Calculate the taxable combat Pay:
The combat pay that can be taxed is gotten by using the total combat pay from your serviceperson’s or your parents leave and earnings statements and subtract the untaxed portion.
Conclusion
Although combat pay is generally classified as untaxable in some cases, it is considered when a financial aid application is made. This gives further insight into the financial status of the applicant.
Therefore, it is important that you fill in the right things so as to avoid a misrepresentation of facts and hinder you from getting that financial aid you need.
Read this: What does EFC stand for? (Major tips and info)
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