Benefits

• Even though the federal tax system considers the BAH income, it is non-taxable income, according to the U.S. Department of Defense. Thus, you receive more than you would compared to the same amount paid in the private sector.
  
  

Misconceptions

• BAH and cost of living (COLA) allowances are not the same thing. COLA allowances are a taxable benefit because all new allowances created after 1986 are taxable, according to Military.com.
  
  

Considerations

• State and local tax law may consider military allowances, such as the BAH, taxable, according to the Department of Defense.