Take a moment to review what you have covered in this lesson:
Some items received by members of the Armed Forces are included in their gross income, while other items are excluded from income. Includible military income is generally the amount shown in box 1 of Form W-2, and should match the taxpayer's last Leave and Earnings Statement for the applicable tax year.
For discharged members of the Armed Forces, a letter of determination from the VA exempts from taxes the appropriate percentage of future and previous pension payments. Form 1040X can be used to amend a previously filed tax return that reported the excludible (nontaxable) income as includible income.
Pay for service in a combat zone is not taxed for an enlisted member of the U.S. military.