Soldiers who serve in a combat zone can exclude certain pay from their taxable income. The Combat Zone Tax Exclusion (CZTE) is unlimited for enlisted members and warrant officers and is limited to the maximum enlisted pay amount, plus the amount of Hostile Fire Pay / Imminent Danger Pay payable to the officer for the qualifying month, for officers.

Retired soldiers are not eligible for CTZE. 

For more tax information, please see:
https://www.irs.gov/Individuals/Military

Internal Revenue Service Publication 3:
https://www.irs.gov/publications/p3#d0e1259

DoD FMR Volume 7A, Chapter 44:
https://comptroller.defense.gov/Portals/45/documents/fmr/Volume_07a.pdf

For additional information on possible changes to this benefit as a Wounded Warrior, please visit the Wounded Warrior Pay section of the Defense Finance and Accounting Services (DFAS) website at:
https://www.dfas.mil/militarymembers/woundedwarrior/woundedwarriorpay/

Hostile Fire/Imminent Danger Pay: 
https://www.dfas.mil/militarymembers/payentitlements/specialpay/hfp_idp/