ASP - How long to recieve after going on AD

[eric275]

For those of you on active duty, how long does it usually take to recieve the ASP (additional special pay) payment after reporting for active duty? Also is it paid in one lump sum and what amount (%) is taken out for taxes? In subsequent years does one recieve the payment around the same time as the previous year? Thanks

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[Kabek]

For those of you on active duty, how long does it usually take to recieve the ASP (additional special pay) payment after reporting for active duty? Also is it paid in one lump sum and what amount (%) is taken out for taxes? In subsequent years does one recieve the payment around the same time as the previous year? Thanks

Eric,
I think you are Army? The paperwork should be completed at your OBC unless you already completed it prior to your CAD. The ASP is paid in an annual lump sum while your VSP will be paid monthly with no needed paperwork. The ASP will be paid as soon as your finance command processes the paperwork and it will be taxed at your current withholding rate. Yes, the payments will be paid around the same time each year. The second year will probably be a little earlier as you will have the paperwork sent in prior to the actual date.

Hope that helps.

 

[jim85213]

Can any Navy people offer perspective on this? Is it similar to the Army?

 

[xhamburgersamx]

Are you taxed 15% on the initial 10k bonus? Or is it 30% like usual? Also can any active duty solider explain the "tax advantage" of working in the military and is it really only 15% federal income tax throughout the fiscal year? Do you have 401k or any other retirement benefits?

 

[eric275]

Are you taxed 15% on the initial 10k bonus? Or is it 30% like usual? Also can any active duty solider explain the "tax advantage" of working in the military and is it really only 15% federal income tax throughout the fiscal year? Do you have 401k or any other retirement benefits?

Well one big tax advantage I can think of is that your entire housing allowance, ~$1200 - $2300/month depending on zip code, is not taxed income.

 

[kalvydas]

Are you taxed 15% on the initial 10k bonus? Or is it 30% like usual? Also can any active duty solider explain the "tax advantage" of working in the military and is it really only 15% federal income tax throughout the fiscal year? Do you have 401k or any other retirement benefits?

1st - Bonus is taxed at 25 (or 28%), plus state taxes if any. Of course as you file your federal income taxes, you might get part (or all) taxes back.

2nd - So called "tax advantage": Part of military pay is not taxable (everything that has allowance in their description). Such non taxable pay include BAH (Basic Allowance For Housing) varies from $800 up to $2900/month; BAS (Basic Allowance For Subsistence) $223.04/month.

Another tax advantage can be obtained, if you get deployed to designated tax-exempt zones. In this case almost all your income is tax free (For commissioned officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received).
And if you get your ASP while at fax exempt zone – it will count as a non-taxable income

Also if you have dependents and are deployed for more than 30 days you are entitled to FSA (Family Separation Allowance) -tax free $250/month.

Other than that, you are taxed at normal tax rate based on your income and exemptions.

3rd - 401K - military has TSP (Thrift Savings Plan), with max contribution of $16,500 in 2009. The only bad side of this plan is that military do not match any percentage of your contributions (as other employers might do), but this plan is really good way to reduce your taxable income and also has low fees and expenses.

 

[Kabek]

1st - Bonus is taxed at 25 (or 28%), plus state taxes if any. Of course as you file your federal income taxes, you might get part (or all) taxes back.

Kalvdyas,

Good catch on the tax rate with the bonus pay. I had written you were taxed at your current rate which I was implying after everything was completed at year end.

1) Another benefit is within a war zone your are eligible to put up to $10K into an account earning 10% while deployed.

2) With a significant portion of your pay not taxed you are most likely still eligible to contribute to a ROTH IRA or have your traditional IRA still be deductible because your not above the AGI for it to be beneficial.

3) You are most likely able to have your student loan interest in a deductible state because your AGI is lower.

4) Having been on both sides I made 30% more on paper in the civilian side but I take home more now because a considerable portion of my pay isn't taxed.

5) There is nothing in the civilian sector that compares to 50% base pay of the high 3 years after 20 years in the system.

Last thought you are working on a very unique and deserving population.

 

[xhamburgersamx]

Kalvdyas,

Good catch on the tax rate with the bonus pay. I had written you were taxed at your current rate which I was implying after everything was completed at year end.

1) Another benefit is within a war zone your are eligible to put up to $10K into an account earning 10% while deployed.

2) With a significant portion of your pay not taxed you are most likely still eligible to contribute to a ROTH IRA or have your traditional IRA still be deductible because your not above the AGI for it to be beneficial.

3) You are most likely able to have your student loan interest in a deductible state because your AGI is lower.

4) Having been on both sides I made 30% more on paper in the civilian side but I take home more now because a considerable portion of my pay isn't taxed.

5) There is nothing in the civilian sector that compares to 50% base pay of the high 3 years after 20 years in the system.

Last thought you are working on a very unique and deserving population.

Thanks for the information Kabek and kalvydas



So i went to this link:
http://www.defenselink.mil/militarypay/mpcalcs/Calculators/RMC.aspx


And I inputted the information for basic HPSP students with 0-3 pay grade and 1 years of experience for Monterey, CA (for use in this example). I get these numbers:

Your Results
Monthly Annual Basic Pay $3,540.30(monthly) $42,483.60 yearly in bold
BAS $223.04 $2,676.48
BAH $2,180.00 $26,160.00
Cash Total $5,943.34 $71,320.08
Tax Advantage 791.94 9,503.31
Regular Military Compensation 6,735.28 80,823.39
Total Annual Family Income: $71,320.08
Total Annual Allowances: $28,836.48
Total Annual Taxable Income: $33,133.60
Total Tax Rate: 0.15

I'm slightly confused why the above calculation has only $33,133.60 under total taxable income when the base pay is $42,483. This would put you in the 15% bracket which is nice but are there standard deductions I'm not aware of to bring the total income to 33k?

For dentists, assuming the 10k ASP and VSP we would earn 43k taxable + the VSP that I don't know number of - That would put us in the 25% tax bracket (between $33,950 and $82,250; plus $4,675). - taken from http://taxes.about.com/od/2009taxes/qt/2009_tax_rates.htm .The difference in the 2 brackets is almost $10,000 which literally makes the entire ASP bonus worthless plus some. I need a CPA!

 

[krmower]

For those of you on active duty, how long does it usually take to recieve the ASP (additional special pay) payment after reporting for active duty? Also is it paid in one lump sum and what amount (%) is taken out for taxes? In subsequent years does one recieve the payment around the same time as the previous year? Thanks

You are not able to take the ASP until you are a licensed dentist. I have seen many new guys come on that are still waiting for their license from their state because they applied late (or their state just takes a long time), or they have to retake boards because they failed.

Once you are licensed you can put in for it immediately. It will be dated as of the day you put it in, but it usually takes 30-60 days to get processed and paid the first time. Each consecutive year it will be automatic on that original date.

 

[pmoney]

I don't want to hijack the thread but what is considered a tax exempt zone? I'd assume Iraq/Afghanistan deployments are tax free.

What about a normal overseas posting (Germany, Korea, etc)?

 

[krmower]

I don't want to hijack the thread but what is considered a tax exempt zone? I'd assume Iraq/Afghanistan deployments are tax free.

What about a normal overseas posting (Germany, Korea, etc)?

Got to be a designated combat zone/hostile area.

Just being overseas doesn't matter.

 

[Hotcarl]

FYI....ASP is still taxed even if recieved in a tax-free zone. If you want to know what is considered a tax-free zone just google combat zone and IRS. Also, You only have to spend 1 day in the zone for the entire month to be free...BOOYAH

 

[krmower]

FYI....ASP is still taxed even if recieved in a tax-free zone. If you want to know what is considered a tax-free zone just google combat zone and IRS. Also, You only have to spend 1 day in the zone for the entire month to be free...BOOYAH

Are you sure about the ASP being taxed in a combat zone? That is not the way I understand it. I've also had friends that take their bonuses while they are over there just for that reason.