Tax breaks are on their way for military personnel stationed in combat zones or hazardous duty areas. Eligible servicemembers can exclude from federal income tax either all or some of their active duty pay earned in Afghanistan, specified parts of the Kosovo area and the Persian Gulf region. The Armed Forces' Tax Guide (PDF) lists some but not all of the designated combat areas.
Qualified hazardous duty areas are: Bosnia-Herzegovina, Macedonia, Croatia, Djibouti, Africa and the Philippines.
(From a Defense Press Service release.)