Redding CA Bookkeeping and Tax Service

Military Contractors and Employees – Did You Know?

If you perform services for the U.S. Military in a combat zone and meet eligibility requirements, you may now be able to exclude as much as $103,900 in earnings from the gross income you report on your tax return. In the past, to qualify for the Foreign Earned Income Exclusion, you had to live in a foreign country and not “maintain an abode” in the U.S. However, in February 2018, Congress removed this requirement for military contractors and their employees working in registered combat zones.

You can only exclude foreign income that you earned while working in support of the U.S. Armed Forces, and you can’t claim any deductions or credits related to that income, such as business travel expenses. Still, if you’ve worked in a combat zone, this law change could save you a lot at tax time.

The foreign earned income exclusion is not automatic. Please contact us to learn more about filing for this exclusion.

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