No, Guam is not tax-free for military personnel. While its income tax system is unique, certain military income, notably retired pay, is subject to taxation.
Understanding Guam's Tax System for Military Personnel
Guam operates an "Internal Revenue Code mirror system," meaning its income tax laws are based on the U.S. Federal Internal Revenue Code. This design results in Guam's income tax rates and rules being the same as those for federal income taxes. Therefore, if an income type is taxable under federal law, it is generally taxable in Guam.
This effectively means that for individuals residing in Guam, their income tax obligations parallel what they would face under federal income tax rules. While Guam does not impose a separate "state income tax" in addition to its mirroring of federal taxes, it does collect income tax based on these federal standards.
Key Taxable Income for Military in Guam
For military personnel residing in Guam, understanding which types of income are taxable is crucial.
- Military Retired Pay: A key point is that military retired pay is taxable in Guam. This aligns with federal tax treatment, where military retired pay is generally considered taxable income.
- Other Military Income: In general, any military income that is taxable under U.S. federal income tax laws will also be subject to tax in Guam due to its mirror tax system. This includes basic pay, incentive pay, and special pay, unless specifically excluded by federal law (e.g., combat zone tax exclusion).
The following table summarizes the general taxability of military income in Guam:
| Income Type | Taxable in Guam for Military | Notes |
|---|---|---|
| Military Retired Pay | Yes | Subject to Guam income tax, mirroring federal tax treatment. |
| Active Duty Pay | Yes (generally) | Basic pay, incentive pay, and special pay are typically taxable. |
| Combat Zone Exclusion | No | Income earned in a designated combat zone is typically exempt, mirroring federal exclusion. |
| Housing Allowances | No (generally) | Basic Allowance for Housing (BAH) is typically not taxable, mirroring federal treatment. |
What This Means for Military Residents
For military members, both active duty and retired, living in Guam, it is essential to be aware that their income is subject to local income tax based on federal rules. This means that they will have income tax obligations similar to those living in a U.S. state that does not have its own separate state income tax, as Guam's system effectively functions as its primary income tax.
