Yes, active-duty military members pay federal income tax on base pay. But major components of the military paycheck — housing allowance, subsistence allowance, combat-zone pay, and VA disability — are federally tax-free. This page walks through every category so you know what to expect on your W-2 and 1040.
What's federally taxable
- Base pay. Reported on W-2 Box 1. Fully taxable as ordinary income at the member's marginal rate.
- Most bonuses and special pays — enlistment bonus, reenlistment bonus, foreign language proficiency pay, aviator continuation pay, submarine duty pay, flight pay — are all taxable at federal level (unless earned in a combat zone).
- Military retirement pay. Fully taxable federally, reported on Form 1099-R.
- CRDP (Concurrent Retirement and Disability Pay). Fully taxable.
What's federally tax-free
- Basic Allowance for Housing (BAH) — tax-free under IRC § 134. See Is BAH taxable?
- Basic Allowance for Subsistence (BAS) — tax-free under § 134.
- Overseas Housing Allowance (OHA) — tax-free under § 134.
- Combat Zone pay — tax-free under IRC § 112, subject to the officer cap. See Combat Zone Tax Exclusion.
- Family Separation Allowance (FSA) — tax-free under § 134.
- Uniform allowance.
- Moving allowance (DLA, TLE, PPM).
- Military death gratuity.
- VA disability compensation — tax-free under 38 U.S.C. § 5301. See Is VA disability tax-free?
- CRSC (Combat-Related Special Compensation).
- GI Bill benefits (tuition, housing, book stipend).
State income tax
State treatment depends entirely on your state of legal residence, which — under SCRA — you keep through every PCS. Nine states have no personal income tax: Texas, Florida, Washington, Tennessee, Nevada, South Dakota, Wyoming, Alaska, and New Hampshire. A service member whose home of record is one of those states pays no state income tax on any military pay, regardless of duty station.
See our Military Retirement Taxes page for the state-by-state breakdown on retirement pay.
Payroll taxes (FICA)
Service members pay Social Security (6.2%) and Medicare (1.45%) on base pay — the same as any other worker. Combat-zone excluded pay is exempt from federal income tax but STILL subject to FICA. Allowances (BAH, BAS) are not FICA-taxable.
Common deductions and credits
- Moving expenses — active-duty PCS moves are deductible under IRC § 217 (one of the few remaining moving-expense deductions post-TCJA).
- Reservists' travel — Reserve and Guard members traveling more than 100 miles for drills can deduct unreimbursed travel expenses above the line.
- Uniform expenses above the uniform allowance may be deductible (state — check IRS Pub 3 for federal rules).
- Earned Income Credit — the CZTE election can dramatically expand EIC eligibility. See CZTE page.
- Saver's Credit — for TSP contributions at lower incomes.
Free tax filing options
- MilTax — Military OneSource's free federal + state return preparation. No income cap. Built for military situations (multi-state PCSes, combat zone exclusion, CZTE-EIC election).
- VITA — Volunteer Income Tax Assistance at most installations during tax season. Face-to-face help.
- IRS Free File — an option if MilTax isn't a fit.
FAQs
Do I have to file if all my income was excluded in a combat zone?
If your only income for the year was CZTE-excluded pay and you fall below the standard filing threshold, technically no. But filing anyway can be valuable — CZTE-EIC election, TSP contribution documentation, and Social Security wage credit all benefit from a filed return.
Do we pay taxes on the housing we live in on-base?
No — government-provided quarters are excluded under § 134.
Is my Basic Needs Allowance (BNA) taxable?
No — BNA is treated like other subsistence allowances, tax-free under § 134.
Related
See the Military Taxes hub, our Combat Zone Tax Exclusion, Is BAH taxable?, and Military Pay Calculator.