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Boost Your Budget: Guide to Re-enlistment Bonuses

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reenlistment bonusesRe-enlistment bonuses in the U.S. Armed Forces have been around for quite some time. Although authorized by the Armed Forces Enlisted Personnel Bonus Revision Act of 1974, American re-enlistment incentives date back to the Civil War.

A veteran Federalist soldier re-enlisting in the Army of the Cumberland could receive a whopping $402–that was a pretty penny for Billy Yank back then. Present-day enlistment bonus programs can be dated back to 1978 and have progressively evolved with the tempo of U.S. Military. They vary from branch to branch, but their basic mechanics remain the same: The Army, Marine Corps, Air Force, Navy and Coast Guard offer lump sum re-enlistment bonuses depending on several determining factors such as special/critical skills, rank and time in service.

Standard Bonuses

Since 2008, the Army has been pressed to retain quality men and women. Answering this call, they have instituted the largest and most diverse lineup of re-enlistment options in the history of U.S. wartime volunteers.

Incentives can range from coveted military training like jump school, assignment extensions and even lump sum cash bonuses ranging from a few thousand dollars to a staggering $150,000. Unlike former re-enlistment era bonuses, these incentives are now available to a broad spectrum of active-duty personnel.

According to the Army Retention Program, qualified individuals “must have completed at least seventeen months of continuous active duty…(have) a military skill designated as critical by the Secretary of Defense…are not currently receiving special nuclear-training pay… (must) enlist in a regular component of the service concerned” In addition, bonuses cannot exceed “the product of fifteen times the monthly rate of basic pay to which the member was entitled at the time of discharge or release.”

Selective Re-enlistment Bonus

In order to boost re-enlistments and retention in critical military occupations, the Selective Re-enlistment Bonus (SRB) was created. In essence, the program seeks to monetarily compensate enlisted service members who choose to extend their contracts.

A new and enhanced Selective Re-enlistment Bonus program offers bonus tiers of $10,000 to $40,000 depending on military occupational specialty. Developed and authorized by Congress, a new feature of the enhanced SRB allows service members with six or more years of active duty to transfer one-year of Montgomery GI Bill benefits to their spouse.

When utilizing this option, an enlisted person must re-enlist for four, five or six years. Not a bad choice when one considers education benefits can amount to nearly $20,000.  Ultimately, staving off transition to the civilian sector enables Marines, Sailors and Soldiers to better focus on the mission at hand.

Taxes

When considering re-enlistment, it’s a good idea to strap on your thinking cap and employ your military mindset. Situational awareness is imperative.

And although re-enlistment bonuses are unilaterally taxed by the Federal government, they are not necessarily subject to state taxes. Depending on where a service member claims residency, one can determine whether a re-enlistment bonus falls under state income tax laws.

Nevertheless, a serviceperson who serves in a combat zone (including tax-free territories in the Middle East) is exempt from having their re-enlistment bonus classified as taxable income. Such Combat Zone Tax Exclusions (CZTE) include the Persian Gulf area (Iraq, Kuwait, etc.), Afghanistan, Kosovo, Pakistan, the Philippines, Somalia, Turkey, Egypt and several other areas that support Operation Enduring Freedom and Operation Iraqi Freedom.

Finally, it must be understood that a service member who deliberately fails to complete provisions of enlistment will not receive the entirety of their bonus. Rather, a portion of the bonus is required to be refunded to the government. This applies to all discharges due to misconduct and/or injuries incurred by misconduct.