Certain aspects of a servicemember’s pay may be taxable or tax-exempt. These distinctions must be considered when accurately establishing the servicemember’s net income for support purposes.
Tax-exempt income includes the following:
- earnings received while the servicemember is in a combat zone. This exemption is on a month-to-month basis. If the member is in a combat zone for at least one day of the month, all income that month is tax-exempt. Bonuses, special pay, and re-enlistment pay received while in a combat zone are also tax-exempt.
- BAH (basic allowance for housing) and BAS (basic allowance for subsistence)
- Disability pay
For maintenance purposes in a Wisconsin divorce, properly accounting for taxation could have a vital effect. Consider the following:
Basic pay: $70,000
Accounting for all income as taxable would lead to a potential maintenance payment of $2,600 monthly. Correctly accounting for tax-exempt income would make the payment $2,800 monthly.
Attorney David Kowalski routinely handles military divorces for both servicemembers and their spouses. Contact him at 608-709-5000 with any questions.