Only members of the military who serve in a Combat Zone or Hazardous Duty area qualify for the "combat pay exclusion".
How Much of My Combat Pay Can I
Exclude? (from IRS Publication 3 Armed Forces Tax Guide)
Enlisted member, warrant officer, or commissioned
warrant officer. If you are an enlisted member, warrant
officer, or commissioned warrant officer, none of your
combat pay is included in your income for tax purposes.
Commissioned officers (other than commissioned
warrant officers). If you are a commissioned officer
(other than a commissioned warrant officer), there is a
limit to the amount of combat pay you can exclude. The
amount of your exclusion is limited to the highest rate of
enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you
served in a combat zone or were hospitalized as a result of your service there. For 2016, the applicable amount is
$8,222.10 per month (that is, $7,997.10 for the highest enlisted pay + $225 for imminent danger pay).
