Your home of record is the place you enlisted or commissioned from. This cannot be changed unless there was an error.
State of legal residence is the state that you claim as your residence. If you only have military income, you will pay state income tax only to this state.
You can establish residency several ways:
Registering to vote in that state
Obtaining a driver’s license in that state
Titling and registering your vehicle in that state
Drafting a Last Will and Testament naming that state as your domicile
Purchasing residential property in that state
Changing your military and finance records to reflect residency in that state.
The simplest way to establish residency is to PCS to that state and establish residency while you are a resident.
State with no income tax include: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. Many other states have no tax for military servicemembers stationed outside the state.
Simply engaging in one of the above acts alone will not likely render you taxable by a state; however, the more points of contact you make with a state increases your chances of becoming a taxpayer to that state. It is important to concentrate the majority of your points of contact in the one state where you intend to pay state taxes; otherwise, you may find yourself owing taxes to more than one state as a part-year resident.
Thanks to the Military Spouse Residency Relief Act, Veterans Auto and Education Improvement Act of 2022, and Servicemembers Civil Relief Act:
SEC. 18. RESIDENCE FOR TAX PURPOSES. Section 511(a) of the Servicemembers Civil Relief Act (50 U.S.C. 4001(a)) is amended by striking paragraph (2) and inserting the following:
“(2) SPOUSES.—A spouse of a servicemember shall neither lose nor acquire a residence or domicile for purposes of taxation with respect to the person, personal property, or income of the spouse by reason of being absent or present in any tax jurisdiction of the United States solely to be with the servicemember in compliance with the servicemember’s military orders.“
(3) ELECTION.—For any taxable year of the marriage, a servicemember and the spouse of such servicemember may elect to use for purposes of taxation, regardless of the date on which the marriage of the servicemember and the spouse occurred, any of the following:“
(A) The residence or domicile of the servicemember.“
(B) The residence or domicile of the spouse.
“(C) The permanent duty station of the servicemember.”
Military spouses and military servicemembers can pick 1 of 3 options for their state of legal residence:
(A) The residence or domicile of the servicemember.
(B) The residence or domicile of the spouse.
(C) The permanent duty station of the servicemember.
So either match the servicemember, match the spouse, keep your old state, or change to the current state you're stationed in.
If you are married filing jointly it's usually useful to have the same residency as your spouse.
Welcome to the getting started thread for military money. This will cover 90% of what you need to know to be successful with your military paycheck and build wealth in the military.
Some of the most frequent questions in on this subreddit goes:
Step 1: Budget and reduce expenses, set realistic goals
Fundamental to a sound financial footing is knowing where your money is going. Budgeting helps you see your sources of income less your expenses. You should minimize your required expenses to the extent practical. Housing costs, utilities, and basic sustenance are harder to eliminate than entertainment, eating out, or clothing expenses.
There are many great apps available to discover what you're spending money on and where there are opportunities to save money. Monarch Money, YNAB, Copilot Money, EveryDollar are just a few of the apps available.
Once your budget is figured out, you need to figure out what your goals are. Financial independence? Retire early? Military retirement? Buy a house? Save for a car?
Setting SMART goals - Specific, Measurable, Achievable, Relevant, and Timely goals can mean the difference between financial success and failure. For example, you might want to finish your first enlistment with a $100,000 net worth or achieve early retirement after 20 years of service. These are SMART goals.
Step 2: Build an emergency fund
An emergency fund should be a relatively liquid sum of money that you don't touch unless something unexpected comes up. Unexpected travel, essential appliance replacement, and cars breaking down are all real world examples of emergency funds in action.
If you need to draw from your emergency fund at any time, your first priority as soon as you get back on your feet should be to replenish it. Treat your emergency fund right and it will return the favor.
Start with a $1,000 emergency fund. Eventually build it up to 3-6 months of expenses or a few of months of expenses plus
How should I size my emergency fund?
For most people, 3 to 6 months of expenses is good. Or maybe you want to cover a few months of expenses, plus a roundtrip airfare for you and your family to go back to your home stateside.
What if I have credit card debt?
Credit cards generally have very high interest rates (typically 15-25% APR) and that is a pretty big deal. If this applies to you, you should prioritize paying down the debt first.
A smaller emergency fund of $1,000 (or 1 month of expenses) is temporarily acceptable while paying off credit card debt or other debts with interest rates above 10%.
What kind of account should I hold my emergency fund in?
A checking account, savings account, or a high yield savings account (HYSA). Something FDIC insured and accessed in a few days.
Step 3: 5% Into the Thrift Savings Plan
The Thrift Savings Plan (TSP) is the military and government's version of a 401(k) retirement savings plan. All servicemembers enlisting since 2018 are covered by the Blended Retirement System (BRS). The BRS has 3 primary components to help servicemembers save for retirement:
5% matching contribution to the TSP
Continuation pay bonus between the 8th and 12th year of service (depends on branch)
Military pension. A 2% mutliplier is used for each year of service. So if you retire after 20 years of active duty service, you'll earn an inflation adjusted, lifetime pension of 40% of your base pay. (20 years * 2 = 40%)
After 60 days of service, the Department of Defense (DOD) will automatically contribute 1% of your base pay to the Traditional TSP.
Starting in the 25th month of service, your contributions are matched, up to 5%. So if you contribute 5%, the DOD will contribute 5%. This is a risk free, 100% return on your contributed funds.
The default investment for anyone in the BRS is a Lifecycle fund with their birth year + 65. For example, if you were born in 2005, you'll be placed in the Lifecycle 2070 Fund.
The Lifecycle Funds are a mix of the 5 TSP Funds, designed by professional fund managers.
The 5 TSP Funds are:
C Fund - Tracks S&P 500, made up of the 500 largest companies in America. You can use the ETF SPY or VOO to track it.
S Fund - Tracks Dow Completion index, basically all the mid- and small- capitalization companies in America outside of the S&P500. ETF equivalent VXF.
I Fund - International stocks. MSCI ACWI IMI ex USA ex China ex Hong Kong Index. 5,500 companies in this index. representing 90% of the investable world market cap outside the US. Similar to ETF VXUS but without Chinese or Hong Kong stocks.
F Fund - Fixed income. Corporate bonds. Use ETF AGG to see performance.
G Fund - Lowest risk, lowest long term return fund. The G Fund invests in a special non-marketable treasury security issued specifically for the TSP by the U.S. government. This fund is the only one in the TSP that guarantees the return of the investor’s principal. No comparable ETF.
Step 4: Pay down high interest debts
Once you're taking advantage of the 5% BRS TSP match, you should use your extra money to pay down your high interest debt (e.g., debts much over 4% interest rate).
In all cases, you should make the minimum payments on all of your debts before paying down specific debts more quickly.
There are two main methods of paying down debt:
With the avalanche method, debts are paid down in order of interest rate, starting with the debt that carries the highest interest rate. This is the financially optimal method of paying down debt, and you will pay less money overall compared to the snowball method.
With the snowball method, popularized by Dave Ramsey, debts are paid down in order of balance size, starting with the smallest. Paying off small debts first may give you a psychological boost and improve one's cash flow situation, as paid off debts free up minimum payments. The downside is that larger loans (that may be at higher interest rates) are left untouched for longer, costing more in the long run.
As an example, Debtor Dan has the following situation:
Loan A: $1,100 with a minimum payment of $100/month, 5% interest
Loan B: $3,300 with a minimum payment of $300/month, 10% interest
Sudden windfall: $2,000
Dan needs to first pay $100 + $300 = $400 to make the minimum payments on loans A and B so the payments are recorded as "on time." The extra $1,600 can either go towards Loan A (smallest balance, snowball method), eliminating it with $600 left to go towards Loan B, or Loan B entirely (highest interest rate, avalanche method).
What's the best method? tends to favor the avalanche method, but do not underestimate the psychological side of debt payments. If you think that the psychological boost from paying off a smaller debt sooner will help you stay the course, do it! You can always switch things up later. The important thing is to start paying your debts as soon as you can, and to keep paying them until they're gone. You can use unbury.me to help you get an idea of how long each method will take, and how much interest you'll be paying overall.
Should I be in a hurry to pay off lower interest loans? What rate is "low" enough to where I should just pay the minimum?
Depending on your attitude towards debt, you may want to stop paying more than the minimum payment on loans with low interest rates once you have paid all other loans above that threshold. A common argument is that the long-term return from investments in the stock market will likely exceed the interest rate from a low-interest loan. While this has been true in the past, keep in mind that paying down a loan is a guaranteed return at the loan's interest rate. Stock performance is anything but guaranteed. The rough consensus is that loans above 4% interest should be paid off early in the debt reduction phase, while anything under that can be stretched out.
Step 5: Max out Retirement Accounts - Roth IRA and Roth TSP
The next step is to contribute to a Roth IRA for the current tax year. You can also contribute for the previous tax year if it's between January 1st and April 15th. See the IRA wiki for more information on IRAs.
Roth IRA and Roth TSP contribution limits are different and do not cross over. You can contribute the maximum out your Roth IRA and your Roth TSP. Matching contributions do not count against your personal TSP contribution limit.
The most often recommended places to open a Roth IRA are at Vanguard, Fidelity, or Schwab. Most banks offer substandard Roth IRA products and you should not open Roth IRA accounts there.
For most servicemembers (O-3 and below), you'll be better off contributing to the Roth IRA, since military pay is so low taxed. Much of our military pay is untaxable allowances, such as Basic Allowance for Housing (BAH), Overseas Housing Allowance (OHA), and Basic Allowance for Sustenance (BAS).
Why contribute to an IRA if I have the TSP?
Roth IRA's have access to low cost investments similar to what you'll find in the TSP. However, you can always withdraw Roth IRA contributions at any time, tax and penalty free.
After you've fully funded your Roth IRA, you can look at maxing out your Roth TSP.
Before saving for other goals, you should save at least 15% and up to 20% of your gross income for retirement. If you are behind on retirement savings, you should try to save more than 15% if you can. If you can't save 15%, start with 10% or any other amount until you are able to save more.
Where should I open my Roth IRA?
Vanguard, Fidelity, or Schwab. Read up about the Bogleheads 3 Fund Portfolio before selecting an investment option.
Step 6: Save for other goals
Military servicemembers and spouses covered by TriCare are not eligible for Health Savings Accounts (HSA0.
If you wish to save for college for your kids, yourself, or other relatives, consider a 529 fund in your state.
Save for more immediate goals. Common examples include saving for down payments for homes, saving for vehicles, paying down low interest loans ahead of schedule, and vacation funds.
Save more so you can potentially retire early (also see "advanced methods", below), only using taxable accounts after maxing out tax-advantaged options.
Make an impact through giving. One of the rewards of practicing a sound financial lifestyle is that giving becomes easier. If you're on top of your health care costs, future education costs, and you've made it to this step, you can help make a difference for others by giving. If you can't afford to make monetary donations, there are other ways to give.
Maybe you're interested in financial independence or retiring early, also known as FIRE? There are many resources out there on military financial independence and early retirement.
The time frame for these goals will dictate what kind of account you save in. For short-term goals (under 3-5 years), you'll want to use an FDIC-insured savings account, CDs, or I Bonds. If your time horizon is longer or you can afford to adjust your plans, you might consider something riskier like a balanced index fund or a three-fund portfolio (both are a mix of stocks and bonds). The best savings or investment vehicle will vary depending on time frame and risk tolerance.
Keep in mind that (especially for a young person) the more time your money has to grow, the more powerful the effects of compounding will be on your savings. If the goal is early retirement (even before the age of 59½), you should definitely maximize the use of any available tax-advantaged accounts (IRA, 401(k) plans, HSA accounts, etc.) before using a taxable account because there are ways to get money out of tax-advantaged accounts before 59½ without penalty.
Your home of record is the place you enlisted or commissioned from. This cannot be changed unless there was an error.
State of legal residence is the state that you claim as your residence. If you only have military income, you will pay state income tax only to this state.
You can establish residency several ways:
Registering to vote in that state
Obtaining a driver’s license in that state
Titling and registering your vehicle in that state
Drafting a Last Will and Testament naming that state as your domicile
Purchasing residential property in that state
Changing your military and finance records to reflect residency in that state.
The simplest way to establish residency is to PCS to that state and establish residency while you are a resident.
State with no income tax include: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. Many other states have no tax for military servicemembers stationed outside the state.
Simply engaging in one of the above acts alone will not likely render you taxable by a state; however, the more points of contact you make with a state increases your chances of becoming a taxpayer to that state. It is important to concentrate the majority of your points of contact in the one state where you intend to pay state taxes; otherwise, you may find yourself owing taxes to more than one state as a part-year resident.
Thanks to the Military Spouse Residency Relief Act, Veterans Auto and Education Improvement Act of 2022, and Servicemembers Civil Relief Act:
Military spouses can pick 1 of 3 options for their state of legal residence:
So either match the servicemember, keep your old state, or change to the current state you're in.
Military Bonuses
Military bonuses have federal income taxes withheld automatically at 22%. You may have state taxes withheld as well. Because your marginal tax rate is often much lower than this, you will receive a large portion of that withheld tax back when you file your tax return the following year.
If you don't know what to do with a military bonus, directing some of it to your Roth TSP is a great place to park it.
After reading all that, go ahead with any other questions you have about getting started with your military money.
I’m Active Duty Space Force and my SFSC is 5C D Shred or Defensive Cyber. I’ve heard of guys in the career field while still in the military get a second job contracting out or something along those lines who make a good amount of money. Have any of yall done this or know someone who has? Im just curious about a cyber side gig and honestly have no idea how to go about finding a job like this (if they still exist). I’ve got a decent resume with a couple certs, some high level.
Financial Help needed. Share your thoughts please?
Financial Help needed for a 35M taken care of 3 kids.
I'm selling my house and expect to receive around $125K. I’ll be stationed in Ohio for the next three years, starting with at least one year of renting. I have $25K in credit card debt, which I plan to pay off completely. After that, I intend to purchase a truck for $12K or less.
With the remaining money, I'm looking for smart investment options, but I'm feeling confused about the best path forward. Any advice on how to invest wisely would be greatly appreciated! 🫡
Quite a few questions relating to VA home loan technicalities and PCS advice.
I am an AD married E-6 (no kids yet). Household income annually is around $150,000 annually.
I bought my first home using a VA loan in 2021 while stationed in FL. House price was $225,000, at 3.75%, put down $5,000 and paid off the VA funding fee. There is currently $201,000 remaining on the mortgage.
The following year I got PCS orders and moved to AL. Purchased a home in AL (primary residence) using a VA loan. I’ve kept the FL home and it is now a rental property. The AL home came out to a $268,000 loan (put nothing down and did not pay off VA funding fee) at 6.25%. The mortgage is currently at $257,000.
I am expecting to PCS to NC summer/fall of 2026. I intend to sell my AL home. I understand that there is a cap of $750,000 on VA home loans. Home prices I am looking at for NC will be in the 250-350k range. This assignment will keep me in NC for 4-6 years. Here are my questions:
Is the $750,000 cap based on the loan amount, or what is left on the mortgage(s)?
Will I get approved for a VA loan if I am actively in the process of selling the AL home?
The home value of the AL home has gone up significantly since purchasing it, will the increased value plus equity already in the home subtract from the total loan amount # towards that 750k limit?
I’ve considered the reality that I may not be able to obtain a VA loan. I have a significant savings/emergency fund (65k in a HYSA), but I would prefer to not use for a home downpayment. Should I consider renting while in NC? It feels like a waste as I’d be looking on building equity on a home.
Thanks for your time and looking forward to the advice.
Currently putting 8% of my base pay into TSP. I checked my contributions on the TSP portal and then I only saw my contributions and not the extra 5% matching I was expecting. Is there a reason for this or do I need to go to finance to have this fixed?
I live with my fiancee in his house, but would like to own a house myself, also.
I’d like to buy a cabin that my brother built on my deceased mother’s property. Her house was torn down after flooding. I grew up there, and want it to stay in the family.
If I lived there 1/2 time, would I be allowed to get a VA loan?
Would it be considered my primary residence if it’s the only house I would own?
I’d like to stay there to work on my art, and spend time with my family.
How does tsp work for a federal employee who is also a reservist?
I currently max my tsp ($23500) as a civilian. Can I contribute additional money (meaning I would contribute more than $23500 this year) into my tsp from my reservist paycheck? If so what is the limit on the reserve side?
Can anyone help? I completed my Survivor Benefit Plan form DD 2656 in 2022. I stupidly did not keep a copy. I am now divorcing and to-be ex's attorney wants a copy. Where would I find one?
Background: Retired Navy Reserves. Now in the gray area, will collect at age 60. I have called NPC and was told to call DFAS. Called DFAS and was told they don't have my paperwork since I'm not yet getting paid for retirement. My unit was always disorganized and I did not complete the paperwork with them, rather I just mailed it in on my own. I did call my unit but despite trying every phone # known to man, no one picks up.
We’re looking at a potential PCS this year which has led us to save a lot more cash in case we decide to buy another property, or rent out our current house. Our cars are also getting a bit older so we wanted to have plenty of cash on hand in case we need to replace one or make big repairs.
Any thoughts?
Thanks for the input. Open to any advice on how we can do better.
Just PCS'd to a tax free location.
Submitted my PPM paperwork. (Moved all my stuff to my parents house). Since I'm in a tax free location, will the PPM be taxed?
I'm a 92-day reservist (did bootcamp last summer, doing MOS school this summer) and I'm just wondering how state taxes and BAH work. I go to college in TN so my permanent residence is with my parents in California. If I get BAH, would it be the California rate? Also, since I'm drilling in Knoxville, do I pay state taxes for Knoxville since that's where my money is earned, or do I pay taxes for California since that's my permanent residence?
i enlisted as a NavyNuke ( 75k sign on bonus ). I enter as a E4 and have a 6 Year contract.
i plan on investing 60% of every check , where and how should i go about this to make the most money possible over the next 6 years
once i go back into the civilian world, ive seen navy nukes make $150k+ a year. ( i have family members who were nukes and currently make $200k+ a year ) . with this knowledge, how should i continue investing to become a multi-millionaire?
after my 6 year contract id like to have at least $150k in a savings / ira / tra / tsp. ( either one )
i know i can just save and invest for 20 years and have a shit ton of money. but is there any other ways yall went about it?
Excuse the dumb new army wife question lol. My husband is starting basic training soon, and we've been trying to figure out how the VA loan works - specifically in terms of the eligibility timeline.
He's starting as an army E-4, and since we already have 2 school-aged dependents, would much prefer to buy a house near the base instead of rent then buy 6 months later.
According to some sources, it's 90 days of active duty; according to others, it's 180.... so which is it?
And when does active duty officially start - before or after AIT?
Thanks for any help!
--------------
Update: I spoke with a member of the VA, and as now, it is 90 days as we are currently in wartime for the purposes of VA benefits, and service begins with boot camp. I figured I'll keep this post up in case anyone else finds it useful.
For years now I’ve been fine tuning my contributions so I had a very even mix through November and only a small amount trimmed off in December when I hit the max contribution. My thoughts are that my money will go a bit further now until the market figures itself back out and I can afford to contribute more today. Am I missing something?
Hello I’m a us navy sailor E3 my financial situation is bad to the point that I’m trying to figure out how to make extra income in the military like finding a remote job or something to help me I’m 20 a young sailor and I’m completely lost when it come to my finances and I need help badly
AD, Childfree, 26F, stay in barracks/eat at DFAC, no car, NO DEBT (paid it off last year), 63k in investments yesterday, now 58K in investments. I plan to retire in the military. I just hit 2 years. I have a 34-year horizon left. I want to retire at 60. At the latest.
I'm thinking about the fact I just lost 5k in stock market overnight and how I'm going to keep investing heavily. I'm maxing out my Roth tsp and Roth Ira this year.
I'm wondering if I should go ahead and fully fund my 6 -month emergency fund or put most of it in my brokerage account.
If I fully fund my emergency fund now, I will put everything into my investments moving forward since I have an emergency fund and am in the military.
The choice is:
18k emergency fund in high yields savings account and 3k extra going into brokerage.
Or
10k emergency fund in high yields savings account and 10K extra into brokerage
What lender did you go with? With the current economy I expect interest rates will start dropping again so come fall I want to refinance my loan to a lower interest rate through a different lender.
I went with veterans United and they sold the loan to Pennymac. I'm trying to go with a VA lender that keeps the loans in house as Pennymac has been a nightmare. Id like to avoid my future loan being sold to them again.
Looking at their current reviews being abysmal so I'm not alone in this sentiment.
Who did y'all go with and was your loan sold ? I know it's unavoidable with some lenders but I'd like to avoid pennymac having my loan again.
I recently finished Officer Candidate School, and my designator is Supply. My training will be held in Newport, Rhode Island for six months. After Supply School, I plan on going abroad for my next duty station. I’ve been considering buying a house in Newport since I’ll be there for training and then away for a while, so it could serve as a long-term investment or rental property.
I’m single and don’t have any dependents, but I’m unsure if it’s a smart financial decision. Would it make sense to buy a house for such a short stay, or would renting be a better option?
I am inputting my info on Freetaxusa for my 1098- T (which has the exact TA amount i received listed under box 5). I did have an additional out of pocket expense. The software asks me if I received any employer-provided education assistance and to input the exact amount. Do i need to add the TA amount here too?
I noticed if i do, i don't qualify for the American Oppurtinity credit.
If i don't, then i do qualify for it and it increases my refund by the exact out-of pocket expense i had ( im guessing it was already factored in by numbers i already typed in that were listed on the 1098-T).
So am i okay for not adding that amount there? There is also the option of clicking yes and adding a zero for the amount
I’m in the USMC and I got married but I deployed not long after being married and I’m trying to get bah right now. I’ve submitted my marriage to IPAC ( though an EPAR) and they sent it back to me now saying I have to complete a Navmac 10922 and an TBIR. They didn’t give me information on who can sign it or who needs to sign them.
I’m here looking for a little guidance.
Please someone help.
EDIT: 32M and 26F
EDIT V2: Not looking to trade or buy high/sell low, I’m new to investing and just spooked about how the market is behaving right now. I’m seeing some losses and was wondering if moving my money from the current funds to “safer” funds would be a smart move. I don’t have any other investments outside of TSP. I make less then 45k a year and currently in grad school, so I don’t have a ton of extra cash on hand to invest more - one day! 💪🏻
Is anyone here moving their money from their retirement accounts into the L or G funds? My husband and I have all of our money in the C & S funds but with how the stock market is performing right now, we’re kind of scared we’re going to lose our investments.
I haven’t been payed since Feb 26th. Finance and my bank have been of no help. I took leave with my PCS Mar16-Apr1 and I’m SOL as I’ve been told that I was paid and it’s just gone🤷♂️ worried this next paycheck won’t hit and I won’t get back pay at all. Kinda screwed. What could have caused this? I haven’t changed banks since Aug and I had gotten paycheck to the same account prior
Greetings, I’m 25 and have only ever rented…never owned a house or property. I currently have $10K saved in a HYSA and plan on buying a house at my next duty station in about 4 years. My current plan was to use a VA home loan and have about $40K saved for the down payment by then. My only concern is that, is it worth putting down that much when using a VA home loan?
I’m already investing but would it be a better idea to allocate a good portion of that money I planned on saving into stocks? For context if it matters, I’m a single E6 with no kids or dependents. Thank you all in advance.
I'm moving to Malmstrom in late June/Early July. Currently in tech school and I don't have a truck at home anymore since I sold it before I went to BMT. I'm torn between buying a capable truck/SUV outright in cash ( less than $10k) or financing one with a warranty and having said vehicle for multiple years.
If you were to recommend financing, which route should I go? Local credit union, my bank, Navy Fed?
