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Military Withholdings
Military members can take out allotments to pay for car loans, mortgages and other debts. The allotment system is provided to help military service members adjust their personal and family finances to military service.
It is a convenience and privilege not to be exploited or abused. Other than amount changes, administrative changes may be made at the request of the allotee without the member's consent. This includes address changes.
Allotments can be taken out involuntarily to pay for bad debts and unpaid child support with court orders.
All Allotments require a DD2558 form.
Discretionary Allotments
Members are authorized no more than six discretionary allotments. Members are required to certify that the allotment is within the limits of the law; for example, allotments may not be used to repay gambling debts in a state where gambling is not permitted.
Most allotments are used for the following approved reasons. Examples include, but are not restricted to, the following:
- Payment of premiums for commercial life insurance for the member, the member's spouse or children. This includes United States Government Life Insurance, Navy Mutual Aid Insurance, Army Mutual Aid Insurance, dental and health insurance for the benefit of family, and payment of vehicle insurance.
- Voluntary payment to a dependent and relatives. This allotment may be made to a spouse, former spouse(s), other dependents, and to a relative(s) not legally designated as a dependent(s). Support allotments may be made payable directly to a court, a state agency, a court trustee, a welfare agency, or to the children's guardian or custodian. This allotment may be made payable to a financial organization for credit to the account of the allottee.
- Deposits to a financial institution, mutual fund company, or investment firm.
- Payment of car loans.
- Payment of mortgage or rent.
- Payment of a loan to repay consumer credit, e.g., a loan or finance company.
Non-Discretionary Allotments
Members can also take out Non-Discretionary Allotments. These do not count against the six discretionary allotments allowed. Payments authorized for non-discretionary allotments are:
- Purchase of U.S. savings bonds.
- Repayment of loans to the Army Emergency Relief, Navy and Marine Corps Relief Society, Air Force Aid Society, and American Red Cross.
- Voluntary liquidation of indebtedness to the United States, including indebtedness incurred due to defaulted notes insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
- Payment of amounts due under the Retired Serviceman's Family Protection Plan, in the case of retired military service members serving on active duty.
- Any repayment of debts owed to an organization for funds administered on behalf of the US Government and any such debts assigned to a collection agency.
- Payment for pledges for charitable contributions to Combined Federal Campaign (CFC). Only one such allotment is authorized for any military service member.
- Payment for pledges for charitable contributions to Army Emergency Relief, Navy and Marine Corps Relief Society, or affiliates of the Air Force Assistance Fund. Only one such allotment is authorized for any Military Service member.
- Allotments to the Department of Veterans Affairs for deposit to the Post-Vietnam Era Veterans Educational Assistance Program. The allotment must be divisible by $5 and with a minimum amount of $25 and not more than $100. Once authorized by the military service member, the allotment must run a minimum of twelve consecutive months, unless the military service member suspends participation or dis-enrolls from the program because of personal hardship or release from active duty.
- Payment of delinquent federal, state, or local income or employment taxes.
Who can take out an allotment?
Members on extended active duty who may make allotments of pay include commissioned and warrant officers, aviation cadets, and enlisted members.
Allotments may be continued to retired status. To aid personnel in the transition from active duty to retired status, all existing authorized discretionary allotments of members on active military service may be continued as approved allotments; however, no new allotments may be established.
Types of Pay and Allowances that can be allotted
Members assigned within the continental United States:
- Basic pay
- Basic allowance for housing (BAH) for members with dependents and members without dependents in the grade of E-7 or higher.
- Basic allowance for subsistence (BAS) for commissioned and warrant officers.
- Career sea pay
- Diving pay
- Flying pay (all crew members)
- Proficiency pay and special duty assignment pay
- Special pay for medical, dental, optometry, and veterinary officers
- Submarine pay
- Personal money allowance
- Incentive pay for hazardous duty
For those assigned outside the continental United States the following pay and allowance items are also authorized to be allotted:
- Family Separation Allowance, Type II (FSA-R only)
- Foreign duty pay
- Special pay for overseas extensions
- Special pay for duty subject to hostile fire and imminent danger (applies only to members in a designated area)
- Overseas housing allowance
- Cost-of-living allowance
Allotment Payment Offices
Questions regarding allotments can be directed to:
Army
The Defense Finance and Accounting Service-Indianapolis Center. Military Pay Operations, Indianapolis, IN 46249. Issues savings bonds and pays all allotments of pay except class X allotments, which are paid by local disbursing officers.
Navy
The Defense Finance and Accounting Service-Cleveland Center, Anthony J. Celebrezze Federal Building, Cleveland, OH 44199. Pays all allotments of pay.
Air Force
The Defense Finance and Accounting Service-Denver Center, Denver, CO 80279-8000. Issues savings bonds and pays all allotments of pay except class X which are paid locally.
Marine Corps
The Defense Finance and Accounting Service-Kansas City Center, Kansas City, MO 64197. Issues savings bonds and pays all allotments of pay.
Combat Zone Exclusion to Taxes
If you are a member of the U.S. Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. You do not have to receive the pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. However, your entitlement to the pay must have fully accrued in a month during which you served in the combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. Enlisted personnel, warrant officers, and commissioned warrant officers can exclude the following amounts from their income.
- Active duty pay earned in any month you served in a combat zone.
- Imminent danger/hostile fire pay.
- A reenlistment bonus if the extension or reenlistment occurs in a month you served in a combat zone.
- Pay for accrued leave earned in any month you served in a combat zone.
- The Department of Defense must determine that the unused leave was earned during that period.
- Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. The pay must be earned in a month you served in a combat zone.
- Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone.
- Student loan repayments that are attributable to your period of service in a combat zone (provided a full year's service is performed to earn the repayment).
- Retirement pay and pensions do not qualify for the combat zone exclusion.
Partial (month) service
If you serve in a combat zone for one or more days during a particular month, you are entitled to an exclusion for that entire month.
What are the current Combat Zones?
A combat zone is any area the President of the United States designates by Executive Order as an area in which the U.S. Armed Forces are engaging or have engaged in combat. An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order.
The Balkans
By Executive Order No. 13119 and Public Law 106-21, the following locations (including air space) were designated as a combat zone and a qualified hazardous duty area beginning March 24, 1999.
- Federal Republic of Yugoslavia (Serbia/Montenegro)
- Albania
- The Adriatic Sea
- The Ionian Sea--north of the 39th parallel (including all of the airspace in connection with the Kosovo operation.)
Beginning November 21, 1995, a "qualified hazardous duty area" in the former Yugoslavia is treated as if it were a combat zone. The qualified hazardous duty area includes:
- Bosnia and Herzegovina,
- Croatia
- Macedonia.
Note:Members of the Armed Forces deployed overseas away from their permanent duty station in support of Operation Joint Forge, but outside the former Yugoslavia (including service in ships in the Adriatic or Mediterranean Seas), Operation Allied Force, Operation Joint Guardian, Operation Southern Watch, or Operation Northern Watch, are treated as if they are in a combat zone solely for the purposes of the extension of deadlines. These personnel are not entitled to other combat zone tax benefits.
Persian Gulf
By Executive Order No. 12744, the following locations (and airspace) were designated as a combat zone beginning January 17, 1991.
- The Persian Gulf
- The Red Sea
- The Gulf of Oman-The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude,
- The Gulf of Aden
- Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar,and the United Arab Emirates.
Qualifying Service
Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes.
Qualifying service outside combat zone
Military service outside a combat zone is considered to be performed in a combat zone if:
- The service is in direct support of military operations in the combat zone,
- The service qualifies you for special military pay for duty subject to hostile fire or imminent danger.
Non-qualifying Service
The following military service does not qualify as service in a combat zone:
- Presence in a combat zone while on leave from a duty station located outside the combat zone,
- Passage over or through a combat zone during a trip between 2 points that are outside a combat zone, and
- Presence in a combat zone solely for your personal convenience.
Note: You are considered to be serving in a combat zone if you are assigned on official temporary duty to a combat zone, or if you qualify for hostile fire/imminent danger pay.
Amount of Exclusion
If you are an enlisted member, warrant officer, or commissioned warrant officer and you serve in a combat zone during any part of a month, all of your military pay for that month is excluded from your income. You can also exclude military pay earned while you are hospitalized as a result of wounds, disease, or injury incurred in the combat zone. The exclusion of your military pay while you are hospitalized does not apply to any month that begins more than 2 years after the end of combat activities in that combat zone. Your hospitalization does not have to be in the combat zone.
If you are a commissioned officer , you may exclude your pay according to the rules just discussed. However, the amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there.
Hospitalized while serving in the combat zone. If you are hospitalized while serving in the combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary.
Example. You are hospitalized for a specific disease after serving in a combat zone for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. The disease is presumed to have been incurred while you were serving in the combat zone. On the other hand, if the incubation period of the disease is one year, the disease would not have been incurred while you were serving in the combat zone.
Hospitalized after leaving the combat zone. In some cases the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left.
Example. You were hospitalized for a specific disease 3 weeks after you left the combat zone. The incubation period of the disease is from 2 to 4 weeks. The disease is presumed to have been incurred while serving in the combat zone.
Form W-2. The wages shown in box 1 of your 1999 Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. If it does, you will need to get a corrected Form W-2 from your finance office.
You cannot exclude as combat pay any wages shown in box 1 of Form W-2.
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