PAYS

According to the Basic Pay chart, PFC Smith is at the "E-3" pay grade and "Over 2" years of service.  This shows that his Basic Pay is $2,402.10 per month.

ALLOWANCES

PFC Smith lives on post in the barracks for free, so he does not qualify for BAH.  However, he pulls the BAH rate for Ft Benning (zip code 31905) to get a proxy for his housing allowance if he did live off-post.  The BAH "without dependents" rate for an E-3 is $1,146 per month.

In addition, PFC Smith is paid $452.56 per month in BAS.

BENEFITS

After reviewing all the benefits the military offers, PFC Smith values the following 4 categories:

1. Healthcare:  He estimates that a comparable plan for a young, healthy, single person would cost $400 per month in premiums.  He estimates no additional expenses, as he is not on any medications or treatment plans.

2. Retirement match:  The Blended Retirement System (BRS) matches up to 5% of his Basic Pay.  Since he maxes out this benefit, this is worth $2,402 x 5% = $120 per month.

3.  Fitness facilities:  PFC Smith enjoys working out, and he thinks a gym membership with pool and occasional access to a peronal trainer would cost $80 per month.

4.  MWR, ITT:  PFC Smith uses the discounted tickets and equipment rentals frequently, and he thinks he would spend $75 more per month after he separates.

PFC Smith's Pays section shows that he currently earns $28,824 per year.  PFC Smith kept his state residency as Iowa, which does not tax military income.  (He picked Florida as his "current state" because they do not levy an income tax).  If PFC Smith gets out of the Army and moves back to Iowa, he would have to earn $30,586 to account for the Iowa income tax he will have to pay.  This is a $1,760 tax advantage.

The Allowances section shows that PFC Smith earns $19,183 per year.  This is equivalent to $25,696 in gross income since he would have to pay Federal, FICA, and Iowa state income taxes on all of it - a $6,513 total tax benefit.

The After Tax Benefits shows PFC Smith's annual $1,860 in value from Ft Benning's fitness facilities and MWR/ITT, which equates to $2,520 in pre-tax income.

His Not Taxed Benefits are $6,241, which covers his estimated healthcare insurance premiums and BRS match.

In total, PFC Smith earns an equivalent gross salary of $65,043 once we take into account all the tax advantages.

The Complex version adds 4 columns to the left side of PFC Smith's Simple PDF charts to show his current estimated income taxes on his $28,824 annual military pay:  $1,577 for Federal, $2,205 for FICA, and $0 for state (because Iowa does not tax military pay).

The Allowances section shows that PFC Smith earns a combined $19,183 per year.  This is equivalent to $25,696 in gross income since he has to pay Federal, FICA, and Iowa state income taxes on all of it - a huge current tax benefit.

The After Tax Benefits shows PFC Smith's annual $1,860 in value from Ft Benning's fitness facilities and MWR/ITT.

His Not Taxed Benefits are $6,241, which covers his estimated healthcare insurance premiums and BRS match.

In total, PFC Smith earns an annual equivalent gross income of $65,043.

PFC Smith's Page 1 shows the estimate of his current military income tax liability.  Only his basic pay is taxed - the allowances and benefits are not subject to income tax.

His Federal taxes section shows that as a single tax filer, he will owe $1,577.  Note that some of his income is taxed at 0% (this is his "standard deduction" that the IRS allows), some is taxed at 10%, and the rest is taxed at 12%.

PFC Smith's FICA section shows that he owes $2,205.  FICA does not allow a "standard deduction", and all of his income is taxed at 7.65%.

PFC Smith's state section is easy - it shows $0.  This is because Iowa does not tax military income.  To replicate this, PFC Smith selected Florida as his current state, since Florida does not have an income tax. 

After calculating PFC Smith's current income taxes on his basic pay, his allowances are added in.  Doing this results in a military net income of $44,225.

PFC Smith's Page 2  starts with his current military net income from page 1 above, which is $44,225.

The next line shows his after-tax benefits of $1,860 that he won't be able to use once he separates from the Army.

The 3 waterfall charts show the Federal, FICA, and state income taxes that he would have to pay in order to net $46,085 (his current military net income plus his after-tax benefits).  Note that premiums paid directly to a health insurance company can be deducted for all income taxes.

His Federal tax is $5,197, which is 3 times as much as he currently pays.  This is because his new, higher civilian gross income falls into the 12% and 22% tax brackets.

His new FICA tax is $4,498, all taxed at 7.65%.

His Iowa state tax is $3,023.  Iowa offers a $40 personal credit, and PFC Smith's income covers 3 of its tax brackets.

Lastly, PFC Smith's Not Taxed Benefits are $6,241, which are added after income taxes are calculated.

In total, PFC Smith earns an annual equivalent gross income of $65,043.

PFC Smith is surprised to learn that his equivalent civilian salary is $65,043.  The chart on the right shows a summary of PFC Smith's:

-Current military net income of $44,231 (left column)

-Current military gross income of $48,008 (center column)

-Equivalent civilian salary of $65,049 (right column)

He runs the tool a few more times, adjusting the benefits up and down to see how those can affect his overall compensation package.

How does your total military compensation package compare to PFC Smith's?  What similarities and differences do you see, and how will those differences affect your own equivalent civilian salary?