3 Reasons Military Pay Increases in 2022
Overall Military Pay and Compensation Set to Increase in 2022. Here’s Why.
The New Year has arrived, and with it comes the usual focus on improving certain areas of our lives. We set goals for healthier lifestyles, productive use of our time, and improving our financial situations. For service members, there are three things that will have an impact on your 2022 military pay.
For most military families, the BAH portion of their compensation is used to the fullest extent possible, which is covering rent/mortgage and applicable utilities. The increase is based on information collected by the DoD in partnership with military commanders and local installation housing offices. Data from hundreds of housing areas is compiled and analyzed to determine when and if increases are necessary for military personnel.
For more information, the Defense Travel Management Office (DTMO) published the 2022 BAH Rates.
To calculate your BAH rate, use the CollegeRecon BAH Calculator.
In another DoD press release, the 2022 Cost of Living Allowance (COLA) rates took effect on 1 January, 2022, with a 2.7% increase. This allowance offsets the higher prices faced by military members at duty locations whose cost of living is higher than the national average.
When it comes to income, more money is good. But it’s not all good news for some locations. The DoD reported that six Military Housing Areas (MHA) will see their COLA rates decrease, and 25 MHAs will no longer receive COLA. The two largest decreases were both in Massachusetts, with the Boston and Worcester MHA rates dropping from 4 to 0 percent.
New York City still has the highest COLA rate in the US at 6 percent.
To calculate the COLA rate for your current location, check out DTMO’s CONUS COLA Calculator.
Deferral on Payroll Tax Ends
For most military members, 2021 saw a reduction in pay to recoup the payroll taxes that were not collected as part of a 2020 Presidential Memorandum. The amount active service members paid each month was upwards of 2% of their base pay. The situation was beyond their control, but the service members went a whole year with less pay.
Now that 2022 has arrived, the payroll tax deferral has ended for most service members. This naturally means that paychecks will “increase”. While it’s not an actual increase in pay, it is letting America’s Defenders have what they deserve, again.
With the rate of inflation rising to the highest it’s been in decades, it would seem that these increases in pay may help ease the financial strain many are facing today. Because of this, it is ever more prevalent to spend and save our money wisely.
For low-income service members, the Basic Needs Allowance has been approved and will start sometime in 2022.
For residents of some states, retired military pay is now tax-free, which leaves more money in the bank.
I suggest further reading The 10 Best Financial Benefits for Members of the Military. This will help you keep your eyes on your benefits.
- Military Pay Charts 2022 [updated]
- COLA to Increase 5.9% for Retirees, Disabled Veterans in 2022
- Military Benefit Changes for 2022
- The FY2022 NDAA Brings 12 Weeks of Paid Parental Leave
- TSP Changes and Limit Updates for 2022