Is Military Income Taxable and What Military Income and is Available for Child and Spousal Support?

Generally, military pay which is: basic pay, special and incentive pay, and bonuses are taxable. However, certain forms of military compensation are tax exempt. 

Most living allowances such as BAS, BAH, and OHA or other similar allowances and reimbursements are exempt from Federal and State taxes and excluded from Social Security taxes. However, CONUS COLA, or cost-of-living allowances to offset expenses for Servicemembers assigned to more expensive areas in the continental U.S., is a military payment that is taxable and should be included in State and Federal taxes. 

Under the Servicemembers’ Civil Relief Act (SCRA), if you are a resident of California and are stationed outside the state, all active-duty military pay is exempt from State income taxes. Pay received by California resident servicemembers stationed in California is subject to State income taxes. 

Military retirement pay received by California residents, regardless of where the servicemember was stationed, while on active duty are taxed by California and the Federal Government. 

Veterans’ benefits and disability benefits for injuries or illnesses resulting from active service are excluded from Federal and State taxes.   

Income (basic pay, special pay, or bonuses and other payments) related to compensation for service in a combat zone is generally exempt from Federal taxes but is not exempt from Social Security taxes. The provisions for tax exclusions for combat service are further explained by the IRS. 

Taxable versus non-taxable income is complicated and considered differently by the Court when support is calculated. While some types of military compensation is tax-exempt, the Court will likely consider the income as available for support.  Base pay, special pay, allowances including BAH and BAS, disability and retirement pay, and all other forms of pay and allowances even if they are not subject to taxation are considered income for the purposes of calculating support. 

Attorney Vera Livingstone has proudly represented many military families and is versed in all aspects of military divorce litigation including DFAS, Survivor Benefits, BAS, BAH, military housing, conduct, retirement, TSP, and much more. Livingstone Law offers a 10% discount for servicemembers and their families.