This is how the suspended 2020 payroll taxes will affect troops in 2021
In August 2020, President Trump issued an executive order that suspended the collection of Social Security payroll taxes for most military members. The suspension applied to individuals that made less than $104,000 annually in taxable income and lasted from September through December 2020. Generally, this applied to service members at paygrades below W-5 or O-5. During these four months, troops saw a slight increase in their paychecks. However, the temporary pay raise was simply a deferment and the money will have to be paid back in 2021.
On December 27, 2020, President Trump signed a bill passed by Congress that will ease the repayment of the four months of Social Security payroll taxes. Instead of troops paying back the 6.5 percent back out of their paycheck for four months, the collection will be spread over the course of 2021. Beginning with the mid-month January paycheck, troops who had their Social Security taxes deferred will notice the deduction of 2.7 percent of their base pay monthly. Those that opt to be paid monthly will see the deduction at the end of the month.
However, there is more math to be done if you want to calculate your take home for 2021. Military members will also see a 3% base pay increase. BAS rates will also increase for 2021 with enlisted members receiving $386.50 per month and officers receiving $266.18 per month. Additionally, depending on their posting, service members could see an increase in their BAH. Of course, the 6.5% Social Security payroll tax will also return for 2021.
Because of all these new variables, and existing ones like years of service, troops may or may not receive smaller paychecks than they received in the last few months of 2020. If you find yourself taking in less cash and experience financial hardship due to an emergency, be sure to turn to your service's emergency relief loan first before resorting to potentially predatory sources of capital. Depending on your situation, you may be eligible for an interest-free loan or a grant. Troops have plenty of things to worry about in the service of the nation; money shouldn't have to be one of them.