How to Choose Your Next Duty Station
Choosing your next duty station or even creating a list of potential new homes is possibly the most stressful part of being a military member. For me, on the officer side, I know that I will move every 3-4 years like clockwork and thats at a junior CGO level. This rate will likely increase towards the end of my career.
So how do you know where you should move or PCS to? My argument here will be that your next duty station could hold the key to upping your Effective Income by over $15,000 per year. This is due to the difference in locality pay also known as Basic Allowance for Housing (BAH).
Why is BAH so Important?
Every zip code has an associated value for your BAH. Its important to remember that you dont use the zip code your house will be in but instead use the zip code that your office will be at and in some cases where the nearest base is. BAH is such a beautiful thing because not only is it huge in some areas, its also tax free.
This is part of the reason military members have such low effective tax rates. Currently 40% of my income is non-taxable because I live in a high BAH city. So instead of paying taxes on my true $91,200 salary, I only pay taxes on $55,000.
The tax difference comes out to be $7k vs $16k owed to the IRS. Another way to look at this is that for every $1 of BAH, you are getting the same worth as about $1.25 of normal income, depending on your tax bracket of course.
Ok, So How Do I Pick My Next Base?
First, I would narrow my list down to areas that are even potential spots for yourself. For some career fields you may be able to go just about anywhere and for others you may only have a handful of bases to choose from. Once you have a list, you can go check all the BAH rates over at militaryrates.com. You will probably begin to notice some wide ranging figures.
For instance an 0-3 would receive $1083 per month without dependents if you were stationed at Malmstrom AFB in Montana. The same 0-3 stationed at Hanscom AFB in Massachusetts would receive $3063 per month. Your first thought might be that theyre so different because Hanscom is near Boston which is vastly more expensive than Montana.
This is potentially true in some situations but certainly not mine. To make this simpler I want to introduce a term I call Effective Income. Effective Income, is the amount of money I receive each month once you take away any location based costs. This allows you to compare apples to apples.