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5 ways civilian and military pay are different

The salary you’re offered in a job interview is generally not what you’ll take home. Understanding five key differences between your civilian paycheck and your LES can reduce the likelihood of surprises and help you pick the option that’s best for you.


Your take-home pay may be less than you expected

When you consider a civilian job offer, it’s important to realize that after taxes and benefits are deducted, your net pay will likely be much less than the salary you were quoted. In the service, the opposite was probably true. You may have qualified for a number of allowances or incentives that made your take-home pay more than your base salary. Because of this, civilian pay can feel like taking a step backward even if the headline salary offer seems generous.

Gross pay

Mandatory deductions

(like taxes)

Voluntary deductions

(like a 401(k))

Take-home pay


Taxes, taxes, taxes

The biggest deduction from your civilian paycheck will likely be taxes. In the military, the federal government generally only taxes base pay, and many states waive income taxes. Other military pay—things like housing allowances, combat pay or cost-of-living adjustments—may not be taxed. In the civilian world, just a few benefits are deducted before taxes, and overall much more of your paycheck is taxable. You may be subject to federal, state and local income tax (though some states and localities charge none), Social Security tax and Medicare tax.

Tip: If you end up working as a contractor or starting your own business, you may not see tax deductions in your paycheck. You will still need to pay estimated taxes, but you’ll need to manage those payments yourself.


You’ll have to compensate for allowances

You may want to make a list of the allowances and special pay you were receiving in the military, and then estimate their dollar value. This can help you determine a few things. First, it will allow you to get a better sense of your total military salary—beyond base pay—which will help you figure out how much you’ll need to make as a civilian. Second, it will help you figure out your civilian budget. Things like your Basic Allowance for Housing (BAH), for example, can serve as a guideline for your housing budget.

Tip: Learn more about how your Basic Allowance for Housing is determined.


Stay on top of your spending

As an active duty service member you may not have had any out-of-pocket costs for health care. As a civilian, you may need to pay monthly premiums and co-pays when you see a doctor or fill a prescription. Even if you are insured through your employer, you will likely need to contribute to your coverage, usually via a deduction from your paycheck. If your employer doesn’t offer coverage, you may need to purchase your own insurance via a state exchange or pay a tax penalty if you remain uncovered.


You may be able to negotiate

When you’re in the military, your pay is determined by your rank. In the private sector, however, there’s room for negotiation. Knowing how much you need to cover your living expenses with something left over is a good starting point for determining your minimum acceptable salary.

Tip: If your employer won’t negotiate on the dollar amount, you may be able to negotiate benefits like vacation time.

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Bank of America and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.