Non-Taxable Military Pay and Benefits

If you’re filing your taxes this year, you might be surprised by how much of your military compensation doesn’t count as taxable income. While your base pay shows up on your W-2, many of the benefits you receive as a servicemember are completely tax-free.

Understanding which parts of your military compensation are taxable can make a real difference when you’re preparing your return. It can also help you navigate the complicated tax system to make smarter financial decisions throughout the year.

This guide breaks down the non-taxable military pay and benefits you may receive. We’ll cover everything from housing and food allowances to moving expenses and in-kind benefits.

Non-Taxable Military Pay and Benefits

Your base military pay is taxable unless you are deployed to a tax-free combat zone. There are several rules regarding how your pay is taxed in these circumstances. In general, your base pay is tax-exempt if you are enlisted, and if you are a commissioned officer, your pay is tax-exempt up to the amount of the highest enlisted pay grade.

Other than that, your base pay is taxable.

However, certain benefits, particularly allowances, are considered non-taxable income. By non-taxable, we mean they are not included in gross income. Please note that this list is subject to change as tax laws/policies change. Always check with an accountant or your base finance office for further details.

Living Allowances

Base Housing and Basic Allowance for Housing (BAH)

Military members typically receive either base housing, which is exempt from taxation, or a housing allowance to cover the cost of their housing. The housing allowance is known as the Basic Allowance for Housing (BAH) and is based on the servicemember’s pay grade, whether they have dependents, and local market conditions. This BAH calculator determines your specific allowance. BAH is tax-exempt.

BAH is not intended to cover all housing costs. Members who receive BAH can keep the difference if their housing costs are lower than their total BAH payments.

Note: If you itemize your taxes, mortgage interest and real estate taxes remain deductible even if you pay these expenses with your BAH.

Overseas Housing Allowance (OHA)

Service members who serve overseas are also entitled to either military housing or an overseas housing allowance. Like BAH, the OHA is based on the member’s pay grade, whether or not they have dependents, and local market conditions. The service member’s OHA is capped by the amount of their rent (in other words, you can’t pocket the difference if your housing allowance is more than your rent).

Basic Allowance for Subsistence (BAS)

The basic allowance for subsistence is a food allowance paid to members who are not eligible to eat in the base dining facilities. This amount is greater for enlisted members than officers. BAS is also tax-exempt.

Cost-of-Living Allowance (COLA) While Living Overseas

Some locations are more expensive to live in than others, which is why the military offers a cost-of-living adjustment to certain military members living in high-cost-of-living locations. COLA is based on location, the member’s pay grade, and whether or not they have dependents.

• Service members who live in high-cost-of-living locations outside the continental United States (OCONUS) may be eligible for OCONUS COLA, which is a non-taxable benefit.
• Some members who live in high-cost-of-living locations in the continental United States (CONUS) are also eligible for CONUS COLA. However, CONUS COLA is taxable.

Family Allowances

• Family Separation Pay – paid when separated for official duties
• Certain educational expenses for dependents, such as the MyCAA education benefit for spouses

Moving Allowances

• Permanent change of station (PCS) moves
• Dislocation allowance
• Relocation or storage of household goods
• Mobile home, trailer or automobile shipment during PCS moves
• Temporary lodging allowance (TLA)
• Certain military base realignment and closure benefits

Death Allowances

• Burial services
• Travel of dependents to the burial site
• Death gratuity payments to eligible survivors

In-Kind Military Benefits

• Medical and dental care
• Commissary and exchange discounts
• Space-available travel on government aircraft
• Legal assistance and defense counseling
• Dependent care assistance
• Morale Welfare and Recreation benefits

Other Non-Taxable Payments and Benefits

• Disability Benefits
• Professional Education, On the Job training
• Tuition Assistance Benefits & GI Bill benefits
• ROTC educational and subsistence allowances
• Uniform allowances
• Uniforms and issued items
• Imminent Danger Pay / Hostile Fire Pay when deployed
• Reenlistment bonuses when the contract is signed in a tax-free combat zone
• Certain benefits for military spouses

These benefits add up to a lot of money each year, and the fact they are not taxable is just another example of our government looking after its troops. Thanks to each of you who serve.

See these related articles regarding military pay and taxes:

• Taxable Military Income
• Tax-Free Zones and Military Pay

Meet the Author

Ryan Guina

Ryan Guina is The Military Wallet's founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Tennessee Air...

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