By Joyce Wessel Raezer & Debbie Fryar
The myriad of military pay entitlements for members of the uniformed services can seem confusing, even overwhelming. Several factors determine the actual pay amount a service member receives - the service member's rank, military specialty, length of service, assignment location, dependents, deployment status and location, and more. Despite the difficulties, however, military families need to understand the categories and amounts of pay and entitlements so they can make informed decisions about their household financial planning.
Let's start with an explanation about some of the terms heard in discussions about military pay. An entitlement is a payment or benefit that is authorized by law. Military members are entitled by law to several types of pay, as well as certain benefits, most notably health care. Regular military compensation generally refers to the mix of pay and allowances that is the military equivalent to civilian wages and salaries. Military pay consists of basic pay and several types of special pays. Allowances are payments provided for specific needs, such as food or housing, when not provided by the government.
There are more than 40 types of military pay, but most service members receive only a few different types throughout their careers. A service member's Leave and Earnings Statement (LES) shows the pays and allowances he or she is receiving. The types of pay and allowances received most often are Basic Pay, Basic Allowance for Subsistence (BAS) and Basic Allowance for Housing (BAH).
Basic pay makes up the largest portion of a service member's compensation. It is structured according to the service member's rank and years of service. Military pay raises normally take effect in January of each year and are set by Congress based on wage increases in the civilian sector. In some years, additional targeted raises are provided for service members of certain ranks and years of service. In recent years, military pay raises have been greater than average civilian raises.
Basic Allowance for Subsistence (BAS) is a non-taxable allowance intended to offset the cost of the service member's meals. The BAS rate is adjusted annually based on the cost of food. All officers receive the same allowance, $175.23 per month in 2004. Most enlisted personnel receive the regular BAS of $254.46. Enlisted personnel in basic training are required to eat in government dining facilities and thus do not receive BAS.
Basic Allowance for Housing (BAH) is a non-taxable allowance to offset housing costs. The amount of BAH is determined by rank, duty assignment and the presence (or lack) of family members. Service members who live in government-owned housing - either in barracks, dorms or family housing - forfeit their housing allowance. BAH is determined through a survey of housing costs in each community for the housing size designated as the standard for each rank. The current standard used to determine the BAH for an E-5, for example, is a two-bedroom townhouse.
Deployment-Related Pays and Allowances. When service members deploy, they receive additional pays and allowances based on their deployment location, length of deployment and whether or not they have a family. Deployment pays and allowances include:
- Family Separation Allowance (FSA) is paid during extended periods of family separation. The current amount of FSA is $250 per month.
- Imminent Danger Pay is for service members serving within an officially declared hostile fire/imminent danger zone. The current rate is $225 per month.
- Hardship Duty Pay compensates service members assigned to certain duty stations deemed to be arduous. The amount is based on the location.
- Per diem, including payments for incidental expenses, is paid to service members on some deployments.
Other Pays and Allowances. The local finance office can provide additional information about the many other special pays and allowances available in special circumstances or to service members performing certain duties. Examples of special pays and allowances include but are not limited to:
- Overseas Housing Allowance (OHA) helps pay the cost of off-base housing in foreign countries. OHA is based on the assignment location.
- Cost of Living Allowance (COLA) is paid to help with higher cost of living in certain areas within the United States and overseas.
- Assignment Incentive Pay may be offered to entice service members to accept or extend an assignment in hard-to-fill billets in certain locations.
- Hazardous Duty Incentive Pay is for certain assignments including demolitions work, flight duty, exposure to certain toxic items and parachuting. The amount is based on pay grade.
- A Clothing Allowance is provided to all service members upon entering the military. Enlisted personnel also receive an annual replacement clothing maintenance allowance that varies by Service and gender.
- Flight Pay, Diving Pay, Sea Pay and Submarine Duty Pay, as well as professional bonus for medical personnel, are among the pays designed to compensate service members in certain missions with certain skills and to retain them in the military.
- Drill Pay for National Guard and Reserve members is based on years of service, military specialty and pay grade.
- Enlistment and re-enlistment bonuses are provided to meet the recruiting and retention needs of the services. They can be paid annually, on a one-time basis or as a set amount spread over several years.
The tax implications of the various military pays and allowances can prove complicated and difficult to understand. Some types of military compensation are taxable and others are not. A helpful rule of thumb is that if the entitlement contains the word "pay" in the title, i.e. Basic Pay, it is considered taxable income unless the service member is serving in a designated tax-free combat zone. If the service member is in a combat zone, all income earned by enlisted members is tax free, including assignment and re-enlistment bonuses. Officers may exclude from income tax only the amount equal to the highest monthly rate of enlisted pay plus their $225 Imminent Danger Pay. If the entitlement contains the word "allowance" in the title, i.e. Basic Allowance for Housing, it usually is non-taxable.
The following example illustrates monthly pay and how that pay is taxed for an E-3 with a family, when deployed to Iraq from his/her duty station at Ft. Lewis, Wash:
In garrison: $1,585.50 basic pay + $254.46 BAS + $903 BAH = $2,742.96 total (only BAS and BAH are tax-free)
Deployed to Iraq: $1,585.50 basic pay + $254.46 BAS + $903 BAH + $250 Family Separation Allowance + $225 Imminent Danger Pay + $100 Hardship Duty Pay + $105 temporary duty per diem for incidental expenses = $3,422.96 (all tax-free)
Electronic Access To Pay Information
MyPay, a web-based service of DFAS, provides up-to-date, round-the-clock pay information for military service members, DoD civilian employees, military retirees and annuitants. Accessed through a PIN number, the MyPay site also may be used to make address changes, review W-2 forms or adjust contributions to the military Thrift Savings Program. Because the service member's Leave and Earnings Statement (LES) can be viewed through this secure site, many military families find MyPay especially useful during deployments. Service members often provide their PIN information to the spouse who then can access the LES through MyPay. Spouses then find they are better able to help manage the family's finances while the service member is away.
Military Pay Resources
To view the current tables for Basic Pay and other pays and allowances, visit the Defense Finance and Accounting Service (DFAS) and click on Military Pay Information.
For more information on tax issues affecting the military, contact your local military Legal Assistance Officer or view the Armed Forces resource page on the Internal Revenue Service website.
Individuals with questions about their military pay first should check with their local military finance office. They can also contact: Defense Finance and Accounting Service, Cleveland Center/ROCAD, P.O. Box 99191, Cleveland, OH 44199-2058. Obtain toll-free numbers and other contact information for each military service at www.dfas.mil. For Coast Guard, phone (800) 772-8724 or (785) 357-3415.