Combat pay for active-duty military personnel is tax-exempt, providing a financial advantage. However, regular federal salaries, including special pay such as overtime, bonuses, and hazard duty pay, are subject to federal income tax. These special pays may also be taxed at a higher rate if lumped into a single paycheck.​ It's essential for federal employees to understand how different... https://www.federalpensionadvisors.com/post/do-federal-employees-pay-less-taxes