Federal and State Tax Withholding

Start Here If You Are New to FITW and SITW

Federal Income Tax Withholding and State Income Tax Withholding deduct from your taxable pay every paycheck. Taxable pay includes basic pay, special pays (HDIP, FLPB, etc.), and bonuses. Non-taxable pay includes BAH, BAS, and OCONUS COLA. Update W-4 elections through MyPay. The Combat Zone Tax Exclusion zeros out all enlisted and warrant officer pay during combat zone service. Officers cap CZTE at the senior enlisted basic pay rate plus HFP/IDP.

This page walks you through tax withholding from your seat as a General Marine. By the end you will know.

• What pay is taxable and what is non-taxable
• The CZTE rules (full exclusion for enlisted, capped exclusion for officers)
• How to update W-4 federal withholding through MyPay
• State of legal residence vs. duty station for SITW
• Puerto Rico and CNMI special rules (territorial tax instead of federal)
• W-2 issuance timing (January each year for the prior tax year)

Every fact on this page comes from DoD 7000.14-R Volume 7ADoD 7000.14-R Volume 7A Chapter 44 (October 2024), Title 26 U.S.C.Title 26 U.S.C., Title 50 U.S.C. section 4001Title 50 U.S.C. section 4001, and IRS Publication 3 (Armed Forces Tax Guide).

What FITW and SITW Are

Per Chapter 44 paragraph 1.1, the chapter describes the Federal Income Tax Withholding and State Income Tax Withholding requirements and procedures for Marine pay.

FITW is the federal income tax DFAS withholds from your taxable pay each paycheck. SITW is the state income tax DFAS withholds based on your state of legal residence (NOT your duty station).

Taxable Pay (Subject to FITW and SITW)

Per Chapter 44 paragraph 2.1, the taxable pay of all Marines is subject to FITW and SITW, except as listed in paragraph 2.2.

Taxable pay items include.

• Basic pay.
• Special pays (HDIP, FLPB, SDAP, AvIP, CSP, etc.).
• Bonuses (SRB, EB, AvB, CP, AB, etc.).
• HDA (High-Deployment Allowance).
• CONUS COLA (taxable allowance).
• Reenlistment bonuses paid as lump sum.
• Most other compensation.

The taxable value of certain non-cash fringe benefits is also subject to federal and applicable state income taxes (per Table 44-4 rules 21 and 22).

Non-Taxable Pay (NOT Subject to FITW and SITW)

Per Chapter 44 paragraph 2.2, several categories of pay are non-taxable.

• BAH (Basic Allowance for Housing). Non-taxable.
• BAS (Basic Allowance for Subsistence). Non-taxable.
• OCONUS COLA. Non-taxable.
• HFP/IDP (Hostile Fire and Imminent Danger Pay). Non-taxable when in a CZ.
• FSA (Family Separation Allowance). Non-taxable when in a CZ.
• Per diem (TAD/TDY allowance). Non-taxable.
• Combat zone pay (per CZTE rules below).
• Most reimbursements (DLA, MALT, lodging reimbursement).

Combat Zone Tax Exclusion

Per Chapter 44 paragraph 2.2.1, the CZTE excludes pay earned during a month in which the Marine performed active duty in a Combat Zone or Qualified Hazardous Duty Area.

Enlisted and Warrant Officer CZTE

Per paragraph 2.2.1.1, ALL compensation of an enlisted Marine or warrant officer received for a month in which the Marine performed active duty in a CZ or QHDA qualifies for the CZTE. There is no dollar cap. Basic pay, special pays, bonuses, and other normally-taxable compensation become non-taxable for the qualifying month.

Officer CZTE Cap

Per paragraph 2.2.1.2, for commissioned officers, the CZTE caps at an amount equal to.

• Basic pay for the senior enlisted member (the highest enlisted basic pay rate, currently SgtMaj of the Marine Corps).
• Plus the amount of HFP/IDP payable to the officer for the qualifying month.

The maximum CZTE for officers updates each year as the senior enlisted basic pay rate updates. Verify the current amount against the IRS Armed Forces Tax Guide (Publication 3).

CZTE Activation Trigger

A Marine qualifies for CZTE for a month if they performed active service in the designated CZ or QHDA for ANY part of that month. A single day in the CZ during the month triggers full-month CZTE eligibility.

CZTE Direct Support Areas

Per Chapter 44 paragraph 2.3.1, certain locations are designated as Direct Support Areas of a CZ. Table 44-1 contains the CZ and Direct Support Area list. Active service in a Direct Support Area also qualifies for CZTE per paragraph 2.3.2.

State of Legal Residence

Per Title 50 U.S.C. section 4001Title 50 U.S.C. section 4001 (Servicemembers Civil Relief Act), a Marine's state of legal residence is the state the Marine claims as a permanent home. SITW deducts based on the state of legal residence, NOT the duty station.

A Marine stationed at MCB Camp Pendleton (California) but claiming Texas as the state of legal residence pays Texas state tax (which is zero, since Texas has no state income tax). The Marine does NOT pay California state tax on military pay solely due to the duty station.

Changing State of Legal Residence

A Marine changes the state of legal residence by establishing residency in the new state. Indicators include.

• Voter registration in the new state.
• Driver's license in the new state.
• Vehicle registration in the new state.
• Owning property in the new state.
• Filing state tax returns in the new state.

The change is documented on DD Form 2058DD Form 2058 (State of Legal Residence Certificate) submitted through your S-1.

Puerto Rico and CNMI Special Rules

Per Chapter 44 paragraph 2.2.2, the U.S. Treasury Department has entered into an agreement with Puerto Rico and the Commonwealth of Northern Mariana Islands requiring withholding of U.S. territorial income taxes INSTEAD of U.S. federal income tax for Marines who claim Puerto Rico or CNMI as their state of legal residence or domicile.

Marines claiming Puerto Rico or CNMI as state of legal residence have territorial tax withheld in lieu of federal tax. They file with the territorial tax authority instead of the IRS for those wages.

Updating W-4 Elections

The IRS Form W-4 (Employee Withholding Certificate) controls the FITW deduction amount. Marines update the W-4 through MyPay.

When to Update the W-4

• Marriage or divorce.
• Birth or adoption of a child.
• Spouse starts or stops working.
• Change to claimed dependents.
• Change to deductions or credits planned for the tax year.
• Refund or balance-due surprise on the prior tax return.

How to Update the W-4 Through MyPay

1. Log into MyPay at https://mypay.dfas.mil/.
2. Navigate to "Federal Withholding" under the "Pay Changes" section.
3. Update the filing status, dependents, and additional withholding fields per the IRS W-4 instructions.
4. Save the change. The change takes effect on the next pay cycle (typically the next pay period after submission).

State Tax Withholding Updates

Marines update SITW through MyPay similarly to FITW. The election form varies by state. Some states use the federal W-4. Others have a state-specific form.

When to Update SITW

• Change of state of legal residence (with DD Form 2058DD Form 2058 submitted through S-1).
• Marriage or divorce affecting state tax filing status.
• Spouse-related state withholding changes.

State Withholding for States With No Income Tax

Marines claiming a state with no state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) have $0 SITW deducted from military pay.

W-2 Issuance

The W-2 (Wage and Tax Statement) summarizes the Marine's taxable wages and federal/state withholdings for the tax year.

W-2 Timing

W-2s are available through MyPay by January 31 each year for the prior tax year (e.g., 2025 W-2 available by January 31, 2026).

Accessing the W-2

Log into MyPay at https://mypay.dfas.mil/. Navigate to "Tax Statement (W-2)" under the "Tax Documents" section. Download the PDF.

W-2 vs. LES Reconciliation

The W-2 should match the year-to-date FITW totals on your December LES. Reconcile the W-2 against the December LES. Discrepancies route through DFAS Marine Corps Pay.

Verifying FITW and SITW on the LES

A monthly LES check confirms tax withholdings are correct.

Step 1. Pull Your LES

Through MyPay each payday.

Step 2. Verify the Deductions Section

The LES shows tax deductions under the Deductions section. Common abbreviations.

• FED TAXES or FITW. Federal Income Tax Withholding.
• ST TAXES or SITW. State Income Tax Withholding.
• The state two-letter code shows the state of legal residence (e.g., "TX" for Texas).

Step 3. Verify the Year-to-Date Totals

The LES YTD section shows year-to-date FITW and SITW totals. Compare against expected withholding based on your W-4 election.

Step 4. Resolve Discrepancies

Coordinate with your S-1. The reporting unit (I&I S-1 with direct UD/MIPS access, or a battalion S-1 routing through their PAC) routes through DFAS Marine Corps Pay.

For W-4 election issues, update the W-4 directly through MyPay rather than routing through S-1.

Common Questions Marines Ask

Why is my BAH not on my W-2?

Per Chapter 44 paragraph 2.2, BAH is non-taxable. Non-taxable pay does not appear in the W-2 wages box (Box 1). The W-2 reflects only taxable wages.

I deployed to Iraq for 2 weeks in March. Is my March pay tax-free?

Per Chapter 44 paragraph 2.2.1, yes for the entire month of March. The CZTE applies to the full month if the Marine performed active service in the CZ for any part of the month. Even a single day triggers full-month CZTE. The March W-2 wages will be reduced by the excluded amount.

I am a Captain (O-3) in a combat zone. Is all my pay tax-free?

Per Chapter 44 paragraph 2.2.1.2, no. Officers cap CZTE at the senior enlisted basic pay rate plus HFP/IDP. The amount above that cap remains taxable. Verify the current cap amount in IRS Publication 3 (Armed Forces Tax Guide).

I am a Texas resident stationed at Camp Pendleton. Why is California state tax appearing on my LES?

Likely a SITW election error. Per Title 50 U.S.C. section 4001Title 50 U.S.C. section 4001, your state of legal residence (Texas) drives SITW, not your duty station (California). Texas has no state income tax, so your SITW should be $0. Update your state withholding election in MyPay. If the LES still shows California, verify your state of legal residence on file with your S-1 (DD Form 2058DD Form 2058).

I claimed too few dependents on my W-4 and got a big refund. Can I fix this for next year?

Yes. Update your W-4 in MyPay to claim additional dependents or increase additional credits per the W-4 instructions. The change reduces your federal withholding starting the next pay cycle.

When do I get my W-2?

W-2s are available through MyPay by January 31 each year for the prior tax year. If you do not see your W-2 by mid-February, contact DFAS Marine Corps Pay.

Where to Go for Help

Routing by Issue

• W-4 federal withholding update. Through MyPay at https://mypay.dfas.mil/. No S-1 routing required.
• State withholding update. Through MyPay. State of legal residence change goes through S-1 with DD Form 2058DD Form 2058.
• W-2 access. Through MyPay each year by January 31.
• CZTE eligibility verification for a specific month. Coordinate with your S-1 against the deployment orders and the CZ/QHDA list.
• Tax preparation help (free for Marines). Volunteer Income Tax Assistance program at most Marine Corps installations during tax season.
• IRS Publication 3 (Armed Forces Tax Guide). https://www.irs.gov/publications/p3.
• DFAS Marine Corps Pay direct contact. Phone 1-888-332-7411 (DSN 312-571-9450 from overseas).

Where to Go Next on This Site

• Pay and Entitlements landing page lists all the pay topics.
• Hostile Fire Pay and Imminent Danger Pay covers HFP/IDP. Family Separation Allowance covers FSA. Combat Zone Tax Exclusion covers CZTE in operational context.
• Pay Problems and Fixes covers the LES error recovery flow.

Related Roles

• Leaders coach Marines on W-4 updates around major life events (marriage, birth, divorce).
• Admin at S-1 processes DD Form 2058DD Form 2058 state of legal residence changes.
• Commanders verify Marines understand CZTE rules before deployment.

FITW and SITW are baseline LES deductions. Update the W-4 in MyPay around life events. CZTE is the universal Marine tax break for combat zone service. Verify your state of legal residence is correct so SITW deducts to the right state.