Active duty and drilling Guard and Reserve members’ pay will increase 5.2% over 2023 rates. It will be the largest increase in pay in two decades. DFAS is due to issue the official pay tables in January 2024. Military pay is taxable in most States.
Basic Allowance for Subsistence (BAS) is going up 1.7% over the 2023 amount. This is for officers and enlisted alike. It is also payable to Guard AGRs and those on long-term ADOS. BAS is generally for those who are on active duty and do not live in the barracks. BAS is meant to offset costs for a member’s meals. This allowance is based in the historic origins of the military in which the military provided room and board (or rations) as part of a member’s pay. This allowance is not intended to offset the costs of meals for family members. Beginning on January 1, 2002, all enlisted members get full BAS, but pay for their meals (including those provided by the government). Because BAS is intended to provide meals for the service member, its level is linked to the price of food. Therefore, each year it is adjusted based upon the increase of the price of food as measured by the USDA food cost index. This is why the increase to BAS will not necessarily be the same percentage as that applied to the increase in the pay table, as annual pay raises are linked to the increase of private sector wages. BAS is not taxable. BAS rate tables are shown here: https://www.dfas.mil/militarymembers/payentitlements/Pay-Tables/bas/.
Basic Allowance for Housing (BAH) is 5.4% over last year’s rates but is nothing like the 12.1% increase received last fiscal year. BAH is set at 95% of housing costs in various predetermined areas of the U.S. BAH is an allowance to offset the cost of housing when you do not receive government-provided housing. Your BAH depends upon your location, pay grade and whether you have dependents. BAH rates are set by surveying the cost of rental properties in each geographic location. Therefore, BAH rates in high-cost areas will be much greater than those in low-cost areas. BAH rates are published on the Defense Travel Management Office Web page. BAH is not taxable.
https://www.defensetravel.dod.mil/site/bah.cfm
For Veterans receiving disability compensation from the U.S. Department of Veterans Affairs, the cost-of-living increase will be 3.2%. VA disability compensation (pay) offers a monthly tax-free payment to Veterans who got sick or injured while serving in the military and to Veterans whose service made an existing condition worse. You may qualify for VA disability benefits for physical conditions (like a chronic illness or injury) and mental health conditions (like PTSD) that developed before, during, or after service.
For those former service members and veterans receiving Social Security payments, the cost-of-living increase will also be 3.2%. The Social Security Retirement benefit is a monthly check that replaces part of your income when you reduce your hours or stop working altogether. It may not replace all your income so it’s best to identify other ways to pay for your monthly expenses as you age. Eligibility is always based on work. Most jobs take Social Security taxes out of your paycheck so you can get a monthly benefit in retirement. Generally, Social Security payments are taxable in most States.
For military retirees receiving an annuity from DFAS, the cost-of-living increase will be 3.2%. Military retired pay is generally taxable income. Retired pay is earned after completing at least 20 good years of military service. It is immediately payable if that 20-year period is all active duty, and the annuity is delayed until age 60 for reservists who do not have at least 20 years of active federal service. Those former military members who retired under the Redux program will see a 2.2% increase in retired pay. For more of an explanation of retired pay, visit this website: https://militarypay.defense.gov/Pay/Retirement/.
For surviving spouses receiving benefits under the Survivor Benefit Plan, the cost-of-living increase will also be 3.2%. Military retired pay stops upon death of the retiree! The Survivor Benefit Plan (SBP) allows a retiree to ensure, after death, a continuous lifetime annuity for their dependents. The annuity which is based on a percentage of retired pay is called SBP and is paid to an eligible beneficiary. It pays your eligible survivors an inflation-adjusted monthly income. The maximum SBP annuity for a spouse is based on 55 percent of the member’s retired pay (or in the case of a member who retires under REDUX, the retired pay the member would have received if under the high-three retirement system). However, a smaller amount may be elected. Benefits paid under the SBP are generally taxable.
Some military retirees, as well as reservists, seek employment as a federal civilian. For those who qualify for a federal civilian retirement, and have retired, their retired annuity will also see a cost-of-living increase of 3.2% in 2024. Generally, civilian retired pay is taxable.
Cost of living increases are based on a formula codified in law. Under current law, the COLAs for Social Security, federal retirees, and VA disability compensation are all calculated based on the rate of inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W covers 29% of the U.S. population living in households with income derived predominantly from clerical employment or jobs with an hourly wage. CPI-W is a monthly measure of the average change over time in the prices paid by urban wage earners and clerical workers for a market basket of consumer goods and services. The CPI-W is based on the spending patterns of urban wage earners and clerical workers. Index data are available for the U.S. City Average (or national average), for various geographic areas (regions and metropolitan areas), for national population size classes of urban areas, and for cross-classifications of regions and size classes. Individual indexes are available for more than 200 items (e.g., apples, men’s shirts, airline fares), and over 120 different combinations of items (e.g., fruits and vegetables, food at home, food and beverages, and All items).
Another Consumer Price Index is the CPI for All Urban Consumers (CPI-U). This index represents 93% of the U.S. population not living in remote rural areas. It doesn’t cover spending by people living in farm households, institutions, or on military bases. CPI-U is the basis of the widely reported CPI numbers that matter to financial markets. As the traditional CPI-U calculation only measures inflation for urban populations, it remains a less-than-reliable source of data for individuals living in rural areas. Some believe that Congress should switch to CPI-U instead of CPI-W in computing cost of living increases. So far, Congress has resisted such a move.
— EANGUS National Office