Military benefits / Pay & Allowances

Special Pays, Bonuses and Military Tax Breaks

Special pays depend on your job, location or duty, such as deployments, flying, diving or hard-to-fill skills. Tax breaks apply to all members and, in some cases, spouses.

Beyond basic pay, many troops earn extra pay for where they serve or what they do. Combined with tax-free allowances, the combat zone tax exclusion and state residency rules, the military gives you more ways to cut your tax bill than most people realize.

What it is

Special and incentive pays are extra money on top of basic pay. There are dozens of them. Some common ones:

  • Hostile Fire / Imminent Danger Pay (HFP/IDP): $225 a month. IDP is paid at $7.50 a day in a designated area, up to $225. HFP pays the full $225 for any month you are exposed to hostile fire. You cannot get both in the same month.
  • Family Separation Allowance (FSA): $300 a month when duty keeps you away from your dependents for more than 30 days in a row.
  • Hardship Duty Pay: for tough locations or missions.
  • Skill pays: flight pay, dive pay, jump pay, language pay, sea pay, special duty assignment pay and more.
  • Bonuses: enlistment, reenlistment and retention bonuses for in-demand jobs.

The tax breaks

  • Tax-free allowances. BAH, BAS, OHA and most moving allowances are not taxed.
  • Combat Zone Tax Exclusion (CZTE). Pay earned in a combat zone or qualified hazardous duty area is excluded from federal income tax. For enlisted members and warrant officers, all of it is excluded. Commissioned officers can exclude up to the highest enlisted pay plus IDP for that month. You also get extra time to file and pay your taxes.
  • State residency. Under the Servicemembers Civil Relief Act, you keep your legal state of residence when you move on orders. If your home state has no income tax, you do not pay income tax to the state where you are stationed.
  • Spouses. Under the Military Spouses Residency Relief Act and a 2022 update, a spouse can choose to use the service member's state of legal residence for taxes, even if they never lived there. This can save hundreds or thousands of dollars.

How to use it

  • Check your LES after any deployment or change of duty. Special pays are easy to miss, and back pay is hard to fix later.
  • Update your state of legal residence with your finance office (DD Form 2058) if you want to keep or change it. Be honest: you need real ties to the state.
  • File with MilTax. It is free and knows military tax rules, including combat pay and spouse residency. See our Military OneSource guide.
  • Put tax-free combat pay in the TSP. Contributions from tax-exempt pay grow and may come out tax-free. See our TSP guide.

What people miss

  • Spouses keep paying the wrong state. Many spouses still pay tax where they are stationed when they could claim the service member's home state. Tell your employer and file the right state form.
  • Combat pay and tax credits. You can choose to count combat pay as income to get a bigger Earned Income Tax Credit. Run the numbers both ways.
  • Bonus repayment. If you leave early, you may have to pay back part of a bonus. Read the contract.
  • FSA is not automatic for everyone. You may need to file a form when you deploy or go TDY. Ask your unit admin.

Related

See BAH and BAS for housing and food allowances, Thrift Savings Plan for combat-zone contributions, and Legal Assistance and SCRA for more on residency rights.

Related benefits

  • Basic Pay and the 2026 Pay Raise
    Basic pay is the core of your paycheck and the number most other benefits are based on. Troops got a 3.8% raise in January 2026. Knowing how basic pay works helps you read your LES and plan for retirement.
  • BAH and BAS: Your Housing and Food Allowances
    BAH helps pay for housing and BAS helps pay for food, and neither one is taxed. For 2026, BAH rose an average of 4.2% and BAS rose 2.4%. These tax-free dollars are a big part of what you really earn.
  • Guard and Reserve Benefits: TRS, Drill Pay and USERRA
    Guard and Reserve members get many benefits even when not activated, including low-cost TRICARE Reserve Select, drill pay, SGLI and on-base shopping. USERRA protects your civilian job when you serve.
  • TRICARE Health Plans and 2026 Costs
    TRICARE is the military health program. Active duty families pay no enrollment fees for Prime or Select, while retirees pay yearly fees that rose for 2026. Pharmacy copays also went up on January 1, 2026.

Last reviewed 2026-11. Not affiliated with the Department of Defense. Confirm current rates with your finance office or the official source.

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