How Do You Calculate Taxes For A Military Salary?
Military salaries consist of pay—such as base pay, bonus pay, proficiency pay and combat pay—and allowances, including housing and subsistence allowances. The rule for paying taxes is that pay is taxable, under most circumstances, while allowances, as payment for benefits that would otherwise be received in kind, aren’t taxable. The Form W-2 you receive at the beginning of each year for income the previous year will sort out what is pay and what are allowances for you, as the Defense Finance Accounting Service (DFAS) prepares it in accordance with IRS regulations. Use your W-2 to determine what DFAS calculated your taxable income to be for the year. It should be the sum of all the pay (not allowances) you received during the calendar year, except for those months in which you served at least one day in a combat zone as an enlisted person or warrant officer. Base pay earned in months in which you spent at least a day (or more, if you’re an airman) in a combat zone should be excluded
