Legislative Changes Impact Military Pay

Service members are affected by recent changes to the tax law, the National Defense Authorization Act for Fiscal Year 2013, and other entitlement changes. Social Security withholding taxes will increase to the normal rate of 6.2 percent. For the past two years, during the “tax holiday,” the rate was 4.2 percent. This affects military and civilian employees.

Some of the other changes affecting service member’s pay include: 

The "fiscal cliff" agreement passed January 1 by Congress permanently extends income tax provisions enacted in 2001 and 2003 tax laws for income levels up to $400,000 for individuals and $450,000 for families, but allows income tax rates to rise on taxable income above those levels.

The dollar amount of the Social Security withholding increase varies depending on the individual’s pay grade. Below are two examples from the Defense Finance and Accounting Service press release. The examples show the increase in Social Security withholdings (otherwise known as FICA)  coupled with the 1.7 percent increase in basic pay. (These calculations do not include other payroll changes, therefore, net pay for an individual member in 2013 could increase, remain the same, or decrease.)

Previous rates - Dec 2012

   Gross Basic Pay
 FICA (4.2%)
 Net Basic Pay
E6 over 10 years of service  3,243.30        -  136.21  = 3,107.09
O3 over 6 years of service  5,271.90        -  221.41  = 5,050.49


New rates - Jan 2013 (includes +1.7% basic Pay raise and 6.2% FICA withholding)

   Gross Basic Pay
 FICA (4.2%)
 Net Basic Pay
E6 over 10 years of service  3,298.50          -  204.50  = 3,094.00
O3 over 6 years of service  5,361.60          -  332.41  = 5,029.19


In the example above, an E-6 with more than 10 years of Service in 2012 sees a reduction of $13.09 in net pay. Likewise, an O-3 with more than six years of service would have a decrease in Net Basic Pay of $21.30.

Service members are encouraged to review their January pay statement to see how these legislative changes affect you.

(Source: http://www.dfas.mil/pressroom/dfasnewsreleasearchive/Release0113001.html)

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