Which pay allowance is known to be taxable in the military?

The pay allowance that is known to be taxable in the military is the CONUS Cost of Living Allowance (COLA). This allowance is provided to service members stationed within the continental United States (CONUS) to help offset the higher living costs in certain areas. Because the CONUS COLA is intended to supplement income rather than to reimburse expenses directly tied to duty assignments, it is subject to federal taxation.

In contrast, other allowances such as the Overseas Housing Allowance, Family Separation Allowance, and the Combat Zone Tax Exclusion are treated differently under tax law. The Overseas Housing Allowance is designed to cover housing costs for those stationed overseas and is generally not taxable. The Family Separation Allowance provides compensation for service members separated from their families due to military orders, which is also tax-exempt. Lastly, the Combat Zone Tax Exclusion allows service members serving in designated combat zones to be exempt from federal income tax on their pay during that period. Therefore, understanding these allowances and their tax implications is crucial for service members managing their finances.