By Curt Sheldon

When you deploy to a combat zone while in uniformed service, all (or, in some cases, most) of your pay is tax-free. After your income becomes tax-free, you have an opportunity unheard of in the civilian world: You can contribute tax-free income to your Roth Thrift Savings Plan (TSP) and Roth IRA.

You don't pay taxes on combat pay when you earn it. You don't pay any taxes while the investments inside the Roth accounts earn income. On top of that, you don't pay any taxes when you take the contributions and earnings out.

If there is such a thing as a free lunch, this is it. If your cash flow allows, consider contributing the maximum amount allowed by law to both a Roth TSP and a Roth IRA while deployed to a combat zone.

Deployment to a combat zone also offers another opportunity. Your reduced taxable income could qualify you for the Earned Income Tax Credit (EITC). The EITC is designed for taxpayers who don't make a lot of money. The idea behind it is that the credit will offset Social Security and Medicare taxes. In an amazing bit of flexibility for the IRS, you can choose to include or exclude your combat pay when determining your eligibility for the EITC.

This article first appeared in Military Officer, February 2018.

Curt Sheldon, CFP®, EA, is a retired Air Force officer and fighter pilot. He is the author of Well and Faithfully Discharged:  Financial TTP for Military Retirement (CreateSpace, 2017). His last feature article for Military Officer was “Tax Traps,” February 2017.