How military federal tax works
BAH and BAS are tax-exempt
Basic Allowance for Housing and Basic Allowance for Subsistence are NOT taxable. They don't show up on your W-2 and aren't factored into federal withholding. Major tax advantage over civilian pay.
Method: Pub 15-T percentage method
This tool applies the IRS Pub 15-T Percentage Method tables for manual payroll systems (monthly). Your monthly taxable wage is matched to a bracket, base tax plus the bracket rate on the excess is computed, then dependent credits and any W-4 Step 4(c) additional withholding are applied. Pub 15-T also permits a wage-bracket method, which can return a slightly different figure.
W-4 changes (post-2020)
The new W-4 replaced "allowances" with dependent credits. Each child under 17 = $2,000/yr in the 2025 W-4 and withholding tables ($166.67/mo) and $2,200/yr in 2026 ($183.33/mo). Other dependents = $500/yr ($41.67/mo).
Traditional TSP reduces taxable income
Traditional TSP comes out BEFORE tax — reduces the wages used to compute withholding. Roth TSP does NOT reduce taxable income (you pay tax now, grow tax-free later).
Combat zone exclusion
Income earned in a designated combat zone is fully excluded from federal income tax (unlimited for enlisted, capped for officers). Not included in this calculator — adjust manually.
This is withholding, not liability
This estimates what DFAS withholds each month. Your actual tax liability is reconciled when you file your return. The standard deduction is already built into the Pub 15-T tables; itemized deductions and other adjustments not entered on your W-4 settle out at filing.
About this entitlement
What you need to know — straight from the regulation
How military federal tax withholding works
Federal income tax withholding on military pay follows the rules in IRS Publication 15-T, Federal Income Tax Withholding Methods. The employer (DFAS) computes withholding each pay period based on the member's Form W-4 elections — filing status, number of dependents, additional withholding, and any pre-tax deductions like Traditional TSP — using either the Percentage Method or the Wage Bracket Method described in Pub 15-T.
Only taxable wages are subject to withholding. In military pay, basic pay and most special / incentive pays are taxable; allowances such as BAH, BAS, DLA, MALT, per diem, TLE, OHA, overseas (OCONUS) COLA, and clothing allowance are non-taxable per IRS Publication 3 and 26 U.S.C. § 134. CONUS COLA is the exception — it is taxable and appears on the W-2 (DoD FMR Vol. 7A Table 44-4, Note 12).
IRS Publication 15-T · IRS Publication 3 · 26 U.S.C. § 134
FICA (Social Security and Medicare)
Service members pay FICA on basic pay only. Under 26 U.S.C. § 3121(i)(2), "wages" for a member of the uniformed services means basic pay — so special and incentive pays and bonuses are subject to federal income tax but are not Social Security or Medicare wages. Social Security is 6.2% up to the annual wage base published by SSA; Medicare is 1.45% with no wage cap. Members with wages above the Additional Medicare threshold owe an extra 0.9% on the excess, administered under IRC § 3101(b)(2).
26 U.S.C. § 3101 (FICA) · 26 U.S.C. § 3121(i)(2) (uniformed-service wages) · SSA Cost-of-Living Adjustment announcements
Combat Zone Tax Exclusion (CZTE)
Per 26 U.S.C. § 112 and IRS Publication 3, enlisted members and warrant officers who serve any part of a month in a designated combat zone may exclude military pay earned during that month from federal gross income. Commissioned officers may exclude up to the highest rate of enlisted pay plus any Hostile Fire / Imminent Danger Pay. Designated combat zones are established by Executive Order and listed by the IRS.
26 U.S.C. § 112 · IRS Publication 3 (Armed Forces' Tax Guide)
Source & references
- Primary source
- IRS Publication 15-T (Federal Income Tax Withholding Methods, 2025–2026); DoD Financial Management Regulation Volume 7A — view official publication
- Regulatory reference
- IRS Pub 15-T · 26 CFR § 31.3402 · 26 U.S.C. §§ 112, 134 · DoD FMR Vol. 7A
- Effective date
- Tax year 2026
- IRS Publication 3 — Armed Forces' Tax Guide
- https://www.irs.gov/forms-pubs/about-publication-3
Military Toolkit is not affiliated with the Department of Defense, DFAS, DTMO, the Department of Veterans Affairs, or any government agency. Rates and rules on this page are pulled directly from the publications cited above. Always verify with your finance office, TMO, or the official rate page before making financial or planning decisions.