For service members and their families, understanding how military pay and allowances work is essential for budgeting, saving, and reaching long-term goals.

 

Breakdown of Military Pay and Allowances:

• Basic Pay: Your basic pay is based on your rank and time-in-service. Annual adjustments, set by Congress, are typically made each January to keep pace with cost-of-living changes.
• Allowances (mostly tax-free): Allowances supplement basic pay and help cover specific expenses, such as:

1. Basic Allowance for Housing (BAH): Covers housing costs based on location, rank, and dependent status.

2. Basic Allowance for Subsistence (BAS): Offsets meal expenses; the rate is standard for all officers and enlisted members, and is adjusted annually.

3. Cost of Living Allowance (COLA): Helps with high-cost duty stations overseas and in certain U.S. locations.

• Special & Incentive Pay: Additional compensation for certain skills or assignments. Examples include: hazardous duty, flight pay, sea or submarine pay, family separation pay, and retention bonuses for critical roles.

 

Breakdown of Taxes & Deductions:

• Taxable vs. Non-Taxable: Basic pay is taxable; most allowances are not.
• Mandatory Deductions: Social Security and Medicare are automatically withheld.
• Other Deductions: Contributions to the Thrift Savings Plan (TSP) or other retirement plans are common.
• State Considerations: Some states exempt active-duty income if you’re stationed elsewhere, and some have no income tax at all.
• Combat Zone Benefit: Pay earned in a designated combat zone is generally tax-exempt for enlisted members and warrant officers.

 

Financial Tips for Service Members

• Know Your LES: Your Leave and Earnings Statement gives a full picture of your monthly income and deductions.
• Plan for PCS & Deployments: Moves and deployments can create financial surprises, budget ahead.
• Invest in Your Future: Use the TSP or another retirement option early and consistently to take advantage of compound growth.

 

How I Can Help

Military life is unique, and so are your financial goals.

I offer:

• One-on-One Counseling: Personalized sessions to review your pay, allowances, and budget.
• Workshops: Group sessions tailored for your needs.
• Goal-Based Planning: From debt reduction to retirement savings, I help you map a strategy that fits military life.

 

Ready to Get Started?

Understanding your military pay is just the first step toward financial security. Let’s create a plan that maximizes your benefits and prepares you for the future! Schedule a consultation with Walters Financial Wellness today!