Military Pay Taxable for Armed Forces Members?

Taxability of Income, Allowances, and Benefits

Jul 24, 2009

Military Pay Not Subject to Tax, PDPhoto

Find out what types of military pay, allowances, and benefits are exempt from U.S. income tax.

Members of the U.S. Armed Forces are eligible to receive many different types of pay, allowances, and benefits. Generally, allowances and benefits are exempt from taxation; however, most types of pay are subject to tax unless the member is serving in a recognized combat zone.

Members of the United States Armed Forces

There are four branches of the United States Armed Forces that generally qualify for special tax treatment for United States income tax purposes. Those four branches are the Army, Navy, Marines, and the Air Force. Additionally, members of the Coast Guard qualify for special tax treatment.

Taxable Military Pay

The following are pay categories that are generally taxable unless the member is serving in a combat zone:

Basic pay - (active duty, attendance at a designated service school, back wages, CONUS COLA, drills, reserve training, training duty)
Special pay - (aviation career incentives, career sea, diving duty, foreign duty, foreign language proficiency, hardship duty, hostile fire or imminent danger, medical and dental officers, nuclear-qualified officers, etc)
Bonuses - (careers status, enlistment, officer, overseas extension, reenlistment)
Incentive pay (submarine, flight, hazardous duty, High altitude/Low altitude (HALO))
Other payments - (accrued leave, high deployment per diem, personal money allowance paid to high-ranking officers, student loan repayment from programs such as the DOD’s Education Loan Repayment Program, etc)

Non-Taxable Military Allowances and Benefits

The following are military allowances and benefits that are generally exempt from tax whether the item is directly provided or reimbursed:

Combat pay – (compensation for active service in a qualified combat zone)
Living allowances - (BAH - basic allowance for housing, BAS - basic allowance for subsistence, housing and cost-of-living allowances abroad whether paid by the U.S. Government or by a foreign government, OHA – overseas housing allowance)
Moving allowance - (dislocation, military base realignment and closure benefits, move-in housing, moving household and personal items, moving trailers or mobile homes, storage, temporary lodging and temporary lodging expenses)
Family allowances - (certain education expenses for dependents, emergencies, evacuation to a place of safety, separation)
Death allowances -(burial services, death gratuity payments to eligible survivors, travel of dependents to burial site)
Travel allowances – (annual round trip for dependent students, leave between consecutive overseas tours, reassignment in a dependent restricted status, etc)
In-kind benefits - (dependent care assistance program, legal assistance, medical/dental care, commissary/exchange discounts, space-available travel on government aircraft)
Other payments – (defense counseling, disability, group-term life insurance, professional education, ROTC educational and subsistence allowances, survivor and retirement protection plan premiums, uniforms furnished to enlisted personnel)

Readers may also enjoy the following article:

Tax on Military Combat Pay: Is Combat Pay for Armed Forces Members Taxable?