MILITARY UPDATE
Services help re-enlisting members gain tax breaks
Military Update focuses on issues affecting pay, benefits and lifestyle of active and retired servicepeople. Its author, Tom Philpott, is a Virginia-based syndicated columnist and freelance writer. He has covered military issues for almost 25 years, including six years as editor of Navy Times. For 17 years he worked as a writer and senior editor for Army Times Publishing Co. Philpott, 49, enlisted in the U.S. Coast Guard in 1973 and served as an information officer from 1974-77.
By Tom Philpott
Military leaders still worry that a record number of overseas deployments are wearing down troops and encouraging too many quality personnel to leave the service.
Yet robust re-enlistment rates among deployed forces suggest morale is high and troops are never more satisfied than when facing danger.
What explains the paradox?
Tax breaks, most likely.
As career-minded service members rotate through combat zones and hazardous duty areas, including Bosnia, Kosovo, the Persian Gulf and now Afghanistan, they learn to time their re-enlistment to take full advantage of tax breaks embedded in such assignments.
For enlisted members and warrant officers, all military compensation paid while assigned there is tax exempt, including re-enlistment bonuses. The only condition on bonuses is that "all acts necessary to become entitled" occur in the combat zone. Typically, that means completion of the right forms and taking an oath. Even members only briefly assigned to combat zones — a VIP military flight crew, for example, can save thousands of dollars by timing their reenlistment. Officers also get a tax break but it's more limited. Officer income is exempt from taxes up to $5382.90 a month, the basic pay rate of the service's top enlisted member. As a result, pilot retention bonuses usually are fully taxable.
Even those who deploy and don't expect to re-enlist — or expect to sign up for only a short term — can be tempted by bonuses fattened by tax exemptions.
Army Sgt. Nancy Blanchard Brevard, a 25-year-old surgical technician with the 28th Combat Support Hospital at Fort Bragg, N.C., arrived in Tuzla, Bosnia, last September for a six-month temporary assignment. Before leaving the states, Brevard said she was briefed on the tax breaks. Last November, after only two months in Bosnia, she elected to re-enlist. Her first enlistment wasn't set to expire until June 2002 but she is scheduled to leave Bosnia in March. In return for her new six-year commitment, longer than Brevard had planned, she received a bonus of almost $10,000, all of it tax free, and half of it paid last November.ÊThe Army also offered her a choice of assignments once she leaves Bosnia, another reason she signed up early.
The services seek any advantage to retain skilled people and are becoming more aggressive in helping members enhance bonuses using tax breaks. Last June, the Air Force changed policy to allow re-enlistment up to a full year, rather than three months, before old service obligations expire. This increases the opportunity for members to reenlist while in tax-exempt areas.
Navy leaders last August and September made two "temporary" but extraordinary exceptions to policy to ensure tax-free status on bonuses for sailors aboard two aircraft carrier battle groups. Battle group argued that bonus offerings would lose a lot of their appeal once the ships left the combat zone.
Navy leaders finally lifted a requirement that sailors re-enlist within the fiscal year of their bonus eligibility.ÊThe Constellation battle group got word with only a day to spare, forcing a blizzard of activity to finalize a surge in re-enlistments.
Vice Adm. Norbert Ryan, chief of naval personnel, noted that a six-year bonus for some nuclear-qualified Navy ratings amounts to $60,000, with half of it paid up front and the rest in equal yearly increments.
When signed for in a combat zone, the entire bonus is tax-free.ÊAssuming the individual's tax rate is 28 percent, a nuclear-trained sailor who re-enlists in a combat zone can boost take-home pay for a six-year bonus by $16,800.
McSally wins
U.S. Central Command has given Lt. Col. Martha McSally, the Air Force's highest-ranked female pilot, an out-of-court victory in her legal challenge to rescind U.S. rules in Saudi Arabia that require servicewomen, when off base, to wear a head-to-toe Muslim robe called abayas.
With McSally becoming a popular guest on national news programs, discussing her lawsuit against Defense Secretary Donald Rumsfeld, Central Command headquarters in Tampa sent a brief message to commanders in Saudi Arabia Jan. 20, ordering changes in the policy on the wearing of abayas when traveling off base. It no longer is mandatory just "strongly encouraged."
The message also removed "any requirement" for personnel to wear civilian clothing to hide their uniforms.
Thomas Neuberger, one of McSally's attorneys, said she won't comment directly on the decision yet, but she gave Neuberger a reaction.
"She said, 'Thank God we live under a system that, if you bring the facts to people, they will protect your religious liberties.'"
Neuberger said he is "guardedly optimistic" that Central Command's orders will be followed, and that, eventually, it will address other aspects of the lawsuit including the ban on woman driving cars off base or sitting in the front seat.
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