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Many new military retirees accept starting salaries that sound attractive … and then are shocked when their first (net) civilian paycheck is significantly smaller than they had expected. That's because they forgot to consider that civilian salaries are fully taxable, whereas they've been used to having a portion of their military compensation tax-exempt (subsistence and housing allowances). MOAA built the calculator below to help retiring or separating members better understand what civilian salary they'll have to earn to realize the same take-home pay they had in the military. Remember that this is just a first-level calculator. You also may need to account for civilian contributions to a 401(k) retirement plan, health insurance, and other expenses. (Please note State Tax Disclaimer)
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Definitions
- Basic Pay, Current, Monthly
- Based on grade and years of service. Go to http://www.dfas.mil/militarypay/militarypaytables/2011MilitaryPayTable1-4.pdf for details. This link will open in a new window, close any new window(s) to return to the input form. NOTE: You may need to close more than one window to return to the input form. You will need Adobe's Acrobat Reader to view this file. If you do not have Acrobat Reader on your computer, go to http://www.adobe.com/products/reader/ for a free download.
- Housing Allowance, Monthly
- Enter monthly amount of any housing allowance. If in government provided quarters, enter 0. This amount is not taxable. Go to http://www.defensetravel.dod.mil/perdiem/bah.html for details. This link will open in a new window, close any new window(s) to return to the input form. NOTE: You may need to close more than one window to return to the input form.
- Subsistence Allowance, Monthly
- Enter monthly amount of any subsistence allowance. This amount is not taxable. Enter 0 if none. For 2011 commissioned and warrant officers received $223.84 per month and enlisted members received $325.04 per month.
- Special Pays, Taxable, Monthly
- Enter monthly amount of any taxable special pays such as Flight Pay, Sea Pay, Hazardous Duty Pay, ConUS COLA, etc.
- Retired Pay, Expected, Monthly
- Based on grade and years of service at time of retirement. Enter proper value based upon which of the three retirement systems (final base pay/high three/REDUX) that applies to you. If leaving service before retirement eligibility, enter 0. Go to http://www.dod.mil/militarypay/retirement/index.html for details. Retired pay calculators can be found at http://militarypay.defense.gov/Tools/index.html. These links will open in a new window, close any new window(s) to return to the input form. NOTE: You may need to close more than one window to return to the input form.
- Tax Filing Status
- Choose your filing status. Your filing status determines the income levels for your Federal tax bracket. It is also important for calculating your standard deduction, personal exemptions, and deduction phase out incomes. The table below summarizes the five possible filing status choices. It is important to understand that your marital status as of the last day of the year determines your filing status.
| Filing Status for 2011 |
| Married filing jointly | If you are married, you are able to file a joint return with your spouse. If your spouse died during the tax year, you are still able to file a joint return for that year. You may also choose to file separately under the status "Married filing separately". |
| Qualified widow(er) | Generally, you qualify for this status if your spouse died during the previous tax year (not the current tax year) and you and your spouse filed a joint tax return in the year immediately prior to your spouse's death. You are also required to have at least one dependent child or stepchild for whom you are the primary provider. |
| Single | If you are divorced, legally separated or unmarried as of the last day of the year, you should use this status. |
| Head of household | This is the status for unmarried individuals that pay for more than half of the cost to keep up a home. This home needs to be the main home for the income tax filer and at least one qualifying relative. You can also choose this status if you are married, but didn't live with your spouse at anytime during the last six months of the year. You also need to provide more than half of the cost to keep up your home and have at least one dependent child living with you. |
| Married filing separately | If you are married, you have the choice to file separate returns. The filing status for this option is "married filing separately." |
For 2011, the standard deductions are $11,600 for married couples filing jointly (and qualified widow(er)), $5,800 for married couples filing separately and singles, and $8,500 for heads of household.
- Number of additional dependents
- A dependent is someone you support and for whom you can claim a dependency exemption. Do not include yourself. In 2011, each dependent you claim entitles you to receive a $3,700 reduction in your taxable income.
- Where you currently file your state income tax
- Choose the state where you currently file your state income tax. We will apply an average state tax rate to your current income to estimate your state taxes. The average tax rate used includes state and local taxes, sales taxes, excise taxes, property taxes, etc.
- State Tax Disclaimer
- This calculator uses an average state tax percentage developed by the Tax Foundation in their February 2011, Special Report No. 189. The report is titled "State and Local Tax Burdens" and can be found at http://www.taxfoundation.org/files/sr189.pdf. The first paragraph of the report states "For nearly two decades the Tax Foundation has published an estimate of the combined state-local tax burden shouldered by the residents of each of the 50 states. For each state, we calculate the total amount paid by the residents in taxes, then divide those taxes by the state's total income to compute a 'tax burden.' We make this calculation not only for the most recent year but also for earlier years because tax and income data are revised periodically by government agencies."
To accurately calculate state and local taxes which vary significantly across the states is very complex. The calculator uses the above report as a source of a single percentage that can best represent each state's tax burden. It is recognized that this may be a gross approximation, but it is felt to be a proper approach for the calculator's general purpose.
- Is your basic pay subject to state taxes in your current state?
- Select "No" only if you are sure that the state where you currently file your state income tax does not collect taxes on your basic pay. All others should select "Yes."
- Where you expect to file your state income tax as a civilian
- Choose the state where you will file your state income tax as a civilian. We will apply an average state tax rate to your current income to estimate your state taxes. The average tax rate used includes state and local taxes, sales taxes, excise taxes, property taxes, etc. See the disclaimer in the above state income tax description.
- Federal Income Tax rates:
- Below are the tax rates and income ranges for 2012:
| 10% |
$0 - 17,400 |
$0 - 8,700 |
$0 - $12,400 |
$0 - 8,700 |
| 15% |
$17,400 - 70,700 |
$8,700 - 35,350 |
$12,400 - 47,350 |
$8,700 - 35,350 |
| 25% |
$70,700 - 142,700 |
$35,350 - 85,650 |
$47,350 - 122,300 |
$35,350 - 71,350 |
| 28% |
$142,700 - 217,450 |
$85,650 - 178,650 |
$122,300 - 198,050 |
$71,350 - 108,725 |
| 33% |
$217,450 - 388,350 |
$178,650 - 388,350 |
$198,050 - 388,350 |
$108,725 - 194,175 |
| 35% |
over $388,350 |
over $388,350 |
over $388,350 |
over $194,175 |
Source: Revenue Procedure 2011-52 http://www.irs.gov
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