Nontaxable combat pay is considered compensation
Members of the military serving in Iraq, Afghanistan, and other combat zone localities can now put money into an IRA, even if they received tax-free combat pay. Under the Heroes Earned Retirement Opportunities (HERO) Act,
military personnel can now count tax-free combat pay when determining whether they qualify to contribute to either a Roth or traditional IRA. Before this change, members of the military whose earnings came entirety from tax-free combat pay were generally barred from using IRAs to save for retirement.
For those under the age of 50, the IRA contribution limit was $5,000 for 2012 and is $5,500 for 2013 and 2014. For those age 50 and over, the limit was $6,000 for 2012 and is $6,500 for 2013 and 2014.