How to Calculate Military Income

How to Calculate Military Income

  1. Active service military including Reserves are paid with a Leave and Earnings Statement (LES)
  2. There can be different types of pay in addition to their base pay.
  3. Flight or hazard pay, rations, clothing allowance, quarters’ allowance, and proficiency pay are acceptable sources of stable income
  4. The lender must establish that the particular source of income will continue to be received in the future.
  5. Non-taxable sources of income can be ‘grossed- up’ 25%.
Base PayQuarters AllowanceSubstinence & Clothing AllowanceOther Military Allowances
  1. Considered stable unless the borrower is within 12 months of release from active duty
  2. Request documentation from the borrower to validate remaining term of service.
  3. Appears as “ETS” (expiration term of service) on LES
  1. Can be used to qualify if verified with the LES
  2. Military quarters and variable housing allowances are non- taxable income
  3. Once non- taxable status is verified, it can be grossed up
  1. Indicated on LES
  2. Verified allowances may be included as qualifying income
  3. Clothing allowances are generally paid on an annual basis.
  4. Divide the annual amount by 12 to convert to monthly income
  1. Obtain verification of type and amount of the allowance.
  2. Verify how long the borrower has received this allowance
  3. Verify 12 months continuance to use for qualifying income
  4. Examples include: flight, overseas, combat, and hazard pay



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