Tax Rules Affecting the Military, Part 2: Taxable Income

There are many military benefits and allowances that may or may not be taxable by local, state or federal governments. Learn about the taxable benefits that are available.
Advertising Disclosure.

Advertiser Disclosure: The Military Wallet and Three Creeks Media, LLC, its parent and affiliate companies, may receive compensation through advertising placements on The Military Wallet. For any rankings or lists on this site, The Military Wallet may receive compensation from the companies being ranked; however, this compensation does not affect how, where, and in what order products and companies appear in the rankings and lists. If a ranking or list has a company noted to be a “partner,” the indicated company is a corporate affiliate of The Military Wallet. No tables, rankings, or lists are fully comprehensive and do not include all companies or available products.

The Military Wallet and Three Creeks Media have partnered with CardRatings for our coverage of credit card products. The Military Wallet and CardRatings may receive a commission from card issuers.

Opinions, reviews, analyses & recommendations are the author’s alone and have not been reviewed, endorsed, or approved by any of these entities. For more information, please see our Advertising Policy.

American Express is an advertiser on The Military Wallet. Terms Apply to American Express benefits and offers.

taxable incomeA piggy bank looks at a hammer in fear.

Tax season is always stressful. Fortunately, there are several places that provide free tax preparation for military members. If you are looking to do your own taxes, it helps to know which pay and benefits are taxable and which are not.

Military pay is confusing. There are a lot of different rules regarding military pay and which benefits, bonuses and special pays are taxable and which are not. This series of articles will focus on clearing up some of the confusion.

Taxable Military Benefits

As a military service member, you earn money from several different allowances and benefits, and there are rules regarding which of these must be reported to the IRS as income and those which can be excluded.

The following items must be included in your reported gross income, unless they were earned while you were serving in a combat zone. The good news is that military taxpayers who receive tax-free combat pay can include it as earned income when determining their earned-income credit and additional-child tax credit and for the purposes of making an IRA contribution.

Basic Pay

  • Active-duty pay, Reserve training and Guard drill pay
  • Attendance at a designated service school
  • Back wages

Special Pay

  • Aviation career incentive
  • Diving duty
  • Foreign duty
  • Medical, dental, pharmacy, optometry and veterinarian pay
  • Nuclear-qualified officers
  • Special-duty assignment pay

Bonuses

  • Enlistment and re-enlistment
  • Officer
  • Career status
  • Overseas extension

Other Payments

  • High-deployment per diem
  • Accrued leave
  • Personal money allowances paid to high-ranking officers
  • Student loan repayment from programs such as the Department of Defense Educational Loan Repayment Program (certain exemptions may occur if you serve in a combat zone during the repayment period)

Please note: This is not an all-inclusive list, and it is subject to change. Always check with an accountant or your base finance office for further details.

See these related articles regarding military pay and taxes:

About Post Author

Get Instant Access
FREE Weekly Updates! Enter your information to join our mailing list.

Posted In:

Reader Interactions

Comments

    Leave A Comment:

    Comments:

    About the comments on this site:

    These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

  1. Mina says

    I didn’t get the info…you say allowances are military taxable income,..what about Veterans benefits, retirement pay..not clear

    • Ryan Guina says

      Mina, Military pay and benefits are different than veteran pay and benefits. Typically, military retirement pay is taxable income at the federal level, and at the state level for some states (some states either don’t have income tax, or they exempt retirement pay or pensions from state income taxes). VA service-related disability compensation is a non-taxable income.

The Military Wallet is a property of Three Creeks Media. Neither The Military Wallet nor Three Creeks Media are associated with or endorsed by the U.S. Departments of Defense or Veterans Affairs. The content on The Military Wallet is produced by Three Creeks Media, its partners, affiliates and contractors, any opinions or statements on The Military Wallet should not be attributed to the Dept. of Veterans Affairs, the Dept. of Defense or any governmental entity. If you have questions about Veteran programs offered through or by the Dept. of Veterans Affairs, please visit their website at va.gov. The content offered on The Military Wallet is for general informational purposes only and may not be relevant to any consumer’s specific situation, this content should not be construed as legal or financial advice. If you have questions of a specific nature consider consulting a financial professional, accountant or attorney to discuss. References to third-party products, rates and offers may change without notice.

Advertiser Disclosure: The Military Wallet and Three Creeks Media, LLC, its parent and affiliate companies, may receive compensation through advertising placements on The Military Wallet. For any rankings or lists on this site, The Military Wallet may receive compensation from the companies being ranked; however, this compensation does not affect how, where, and in what order products and companies appear in the rankings and lists. If a ranking or list has a company noted to be a “partner,” the indicated company is a corporate affiliate of The Military Wallet. No tables, rankings, or lists are fully comprehensive and do not include all companies or available products.

Editorial Disclosure: Editorial content on The Military Wallet may include opinions. Any opinions are those of the author alone, and not those of an advertiser to the site nor of  The Military Wallet.

Information from your device can be used to personalize your ad experience.