I am in the US Army and when we are deployed to a designated war/combat zone our pay is not taxable (fed taxes only).

Also when we are deployed to the same areas, we can participate in the Savings Deposit Program. 10% return on up to $10k, interest compounds quartly.

I just checked DFAS (the people/group who pays me) and they say that the IRS considers money earned by that program taxable income. What the hell. My reg pay isnt taxable but my extra pay I make because I like to save money is taxable.

heres to you IRS, kiss my &^%

Have you notified your congresscritter and/or representative about your concerns? They're the ones who make the laws, not the IRS.

Dividends are taxable income. This doesn't seem like a huge shocker.

Yes, your regular pay is tax exempt, and interest you make on savings is not. I hate to say it but you're over-reacting. No law ever said you should be exempt from any and all taxation in your life when you are in a combat zone. I'd say it's a pretty fair deal that your actual paycheck is tax exempt, wouldn't expect more.

And BTW when *I* was in a combat zone only the first $500 a month of MY pay was tax exempt.