Taxable and Non-taxable Allowances

I’ve noticed some questions on Yahoo answers about which allowances are taxable and which are not.  At the current time, the only taxable allowance is CONUS COLA, the Cost of Living Allowance paid to people who living in certain expensive parts of the continental United States.  By federal law, all new allowances created after 1986 will be taxable.  Inexplicably, the Family Supplemental Subsistence Allowance, which was created in 2001, is non-taxable.  Go figure.

Basic Allowance for Housing (BAH) – non-taxable

Basic Allowance for Subsistence (BAS) – non-taxable

Clothing Allowance – non-taxable

Cost of Living Allowance (COLA), within the US (CONUS) – taxable

Cost of Living Allowance (COLA), outside the continental US (OCONUS) – non-taxable

Dislocation Allowance (DLA) – non-taxable

Family Separation Allowance (FSA) – non-taxable

Family Subsistence Supplemental Allowance – non-taxable

Move In Housing Allowance (MIHA) – non-taxable

Overseas Housing Allowance (OHA) – non-taxable

Temporary Housing Allowance (TLA) – non-taxable

Temporary Housing Entitlement (TLE) – non-taxable

Please let me know if you see any errors or omissions.

Update:  I’m sure you all know this, but if it is called a “pay,” it is usually taxable.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • Tony

    Is it true that Alaska and Hawaii cost of living allowance are not taxed?

    This figure is quite significant if it is not taxed!

    Please let me know if this is correct.

    • shawn

      I know Alaska counts OCONUS but Hawaii is conus

      • ste

        No, Hawaii is OCONUS. COLA NOT taxable on the Fed. side. Hawaii State taxes will tax that amount as income, however.

        • Watchin’ the fun

          Let’s look at the income reporting and tax return forms – such as IRS Form W-2 and the “long” form 1040: There isn’t any block on either form to show normally non-taxable allowances as taxable income. Also, why should legal residents of Alaska or Hawaii who are stationed in their home of record state be taxed or not taxed differently than residents of the other 48 who are stationed in either Alaska or Hawaii ? How will the W-2 show that a military member is or is not an Alaskan or Hawaiian resident ? This appears to be built-in discrimination varying the taxability based on residency.

    • Guest contributor

      NO allowance is taxable, where ever you are stationed. Only items named “PAY” are taxable.

      • Kate

        Actually, CONUS COLA is taxable. It used to be true that allowances were never taxable, but that is no longer true. At the current time, CONUS COLA is the only taxable allowance. However, under federal law, all allowances created after 1986 are supposed to be taxable.

        • Guest contributor

          Annual “COLA” goes into base pay which is taxable – COLA would be better named Annual base pay increase due to higner cost of living. The other non-base pay allowances – Food, Housing, Uniform, etc, also get annual increases but these allowances have never been taxable.

          • Kate

            We’re actually talking about the Cost of Living Allowance paid to certain members who reside in high-cost areas, not the Cost of Living Adjustment that changes base pay each year. Very different things, but often confused because they share an acronym.

  • CSP

    If you are referring to the COLA we get in Ak- it is not taxable cause AK is considered OCONUS.



    • Kate

      Lee, I’m unaware of any situations where VHA is still used, having been replaced by BAH. Are you receiving VHA, if so, can you tell me about your situation? Thanks!

      • Lee Collins

        My nephew received a W-2 that showed both BHA AND VHA to be taxable , both being excluded from box 14. He is Retired military and teaches ROTC. The two together cause him to have a tax deficit. I know VHA is no longer part of allowances (replaced by BHA), I am looking for info that tells me how to treat it.

        • Kate

          I don’t know a lot about ROTC/JROTC, but I don’t believe that their allowances are non-taxable because they are employees of the school or school district, not the military. I found this case that discusses the issues:… I hope this helps.