COLA: The Two Different Cost-of-Living Allowances People Mix Up
There are two military allowances both called COLA, one stateside and one overseas, and they work differently down to whether they are taxed. Here is how to tell them apart.
The bottom line up front
- 1.There are two military COLAs: CONUS COLA (stateside) and OCONUS COLA (overseas), and they work differently.
- 2.COLA is not your housing allowance; BAH and OHA cover housing, while COLA offsets non-housing goods and services.
- 3.CONUS COLA is a smaller allowance and is taxable income.
- 4.OCONUS COLA is larger, tax-free, and adjusts with cost surveys and currency exchange rates during a tour.
- 5.Because OCONUS COLA moves with exchange rates, do not budget on it staying fixed for your whole tour.
COLA, the Cost-of-Living Allowance, trips people up because there are actually two of them, and they are not the same thing. One is for high-cost areas inside the continental United States, and one is for overseas duty stations. They are calculated differently, they cover slightly different things, and one is taxed while the other is not. Knowing which COLA you are dealing with keeps you from being confused by your own LES.
First, COLA is not your housing allowance
The most common mix-up is confusing COLA with housing money. They are separate. BAH (stateside) and OHA (overseas) cover your rent and housing costs. COLA is about the cost of everything else, the day-to-day goods and services like groceries, gas, and household items that cost more in some places than others. COLA does not pay your rent; it offsets the higher price of living in an expensive location.
CONUS COLA: the stateside one (taxable)
CONUS COLA is paid to service members stationed in the more expensive parts of the continental United States, where non-housing costs run meaningfully above the national average. It is generally a smaller allowance, it is keyed to your rank, dependents, and years of service, and it can change or even disappear as local costs are reassessed. Importantly, CONUS COLA is taxable income, unlike most military allowances, because it is not tied to housing.
OCONUS COLA: the overseas one (tax-free)
OCONUS COLA is paid at overseas duty stations to offset the higher cost of goods and services compared to a typical stateside location. It is more substantial than its CONUS cousin and it moves with real-world conditions, adjusting periodically based on cost surveys and currency exchange rates, so the amount can go up or down during a tour. Unlike CONUS COLA, OCONUS COLA is not taxed.
OCONUS COLA can change mid-tour
Because overseas COLA tracks exchange rates and periodic cost surveys, the amount on your LES can shift while you are stationed there, sometimes by a noticeable amount when the local currency moves. It is not a fixed number for your whole tour, so do not build a tight budget around it staying exactly where it starts.
The quick comparison
| CONUS COLA | OCONUS COLA | |
|---|---|---|
| Where | High-cost areas in the continental US | Overseas duty stations |
| Covers | Higher non-housing costs | Higher overseas goods and services |
| Taxed? | Yes, taxable | No, tax-free |
| Stability | Reassessed periodically | Moves with surveys and exchange rates |
The bottom line
There are two COLAs. CONUS COLA is a smaller, taxable allowance for expensive stateside locations; OCONUS COLA is a larger, tax-free allowance for overseas duty that moves with exchange rates and cost surveys. Neither one is your housing money, that is BAH or OHA. Know which one applies to your station, and remember the overseas version can change during your tour.
Estimate your allowance with the COLA Calculator, and sort out the housing side with the BAH Comparison.
Sources
- DoD FMR Vol 7A: Cost-of-Living Allowance (CONUS and OCONUS)
- DTMO: CONUS COLA and Overseas COLA rates and methodology
- 37 U.S.C. § 403b and § 475: cost-of-living allowances
Figures reflect 2026 rates and regulations. This guide is general information, not personalized financial or tax advice. Always verify with your finance office or a tax professional before making a decision. How we research and source: our methodology.
FAQ
Frequently asked questions
- What is the difference between CONUS and OCONUS COLA?
- CONUS COLA is paid in high-cost areas within the continental United States and is taxable. OCONUS COLA is paid at overseas duty stations, is generally larger, and is tax-free. Both offset the higher cost of non-housing goods and services, but they are calculated and treated differently, and only the overseas one moves with exchange rates.
- Is military COLA the same as BAH?
- No. BAH (stateside) and OHA (overseas) cover housing costs like rent. COLA covers the higher cost of everything else, such as groceries, gas, and household goods, in expensive locations. They are separate allowances that can both appear on your LES.
- Is COLA taxable?
- It depends which one. CONUS COLA, paid in high-cost stateside areas, is taxable income. OCONUS COLA, paid overseas, is tax-free. This is one of the practical differences between the two allowances that share the COLA name.
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Run your own numbers
REF: Military Toolkit Guides, effective 2026
Official 2026 DoD, DFAS, DTMO, IRS, and VA sources. See each guide’s Sources list
Results are estimates. Always verify with your finance office.