The Military Leave and Earnings Statement (LES) details pay, deductions, and entitlements. To Read Your Military LES Effectively, identify key sections: entitlements, deductions, allotments, leave, taxes, and retirement. Lenders use the LES for mortgage applications, verifying income and allowances. It aids budgeting, investment planning, and understanding VA loan qualifications. Monitor it monthly for accuracy and utilize TSP contributions.
In this guide, we break down the LES in simple terms, helping first-time homebuyers, seasoned investors, and real estate professionals understand how to leverage this document for financial planning and mortgage applications.
What is a Military Leave and Earnings Statement (LES)?
A Military LES is a monthly financial document that provides service members with a detailed breakdown of their pay, deductions, and entitlements. It is similar to a civilian pay stub but includes military-specific elements such as allowances and special pay.
Why is the LES Important?
- Budgeting: Helps service members track income and expenses.
- Loan Applications: Mortgage lenders use it to verify income.
- Investment Planning: Understanding pay and benefits aids in financial decision-making.
- Tax Preparation: Ensures proper filing of federal and state taxes.
- Retirement Planning: Helps monitor Thrift Savings Plan (TSP) contributions and military pension details.
Breaking Down the LES: Key Sections Explained
Your LES consists of several important sections, each serving a distinct purpose. Here’s how to navigate them:
1. Identification Information
Located at the top of your LES, this section includes:
- Name and Social Security Number (SSN) (partially masked for security)
- Pay Grade: Your rank and corresponding pay scale
- Branch of Service and Component: Active duty, reserve, or National Guard
- Period Covered: The month for which the LES is issued
2. Entitlements (Earnings)
This section outlines your gross income before deductions, including:
- Basic Pay: Standard salary based on rank and years of service
- Basic Allowance for Housing (BAH): If applicable, covers housing costs
- Basic Allowance for Subsistence (BAS): Helps with meal expenses
- Special Pay: Incentives for hazardous duty, flight status, or deployment
- Bonuses: Reenlistment or sign-on bonuses, if applicable
Example Calculation:
- E-5 (4 Years of Service) Base Pay: $3,200
- BAH (Washington, D.C., no dependents): $2,000
- BAS: $450
- Special Pay (Hazardous Duty): $225
- Total Gross Pay: $5,875
3. Deductions
These are amounts subtracted from your pay, such as:
- Taxes: Federal and state income taxes
- Social Security & Medicare (FICA): Standard payroll deductions
- Service-Related Deductions: Thrift Savings Plan (TSP), Servicemembers’ Group Life Insurance (SGLI), and other withholdings
- Garnishments: Court-ordered payments such as child support or down payment
Example Deduction Breakdown:
- Federal Tax: $500
- State Tax: $200
- FICA (Social Security & Medicare): $400
- SGLI Premium: $29
- TSP Contribution (5%): $282
- Total Deductions: $1,411
4. Allotments
Allotments are voluntary payments taken directly from your pay, such as:
- Retirement Savings Contributions
- Loan Payments (e.g., auto, personal, or home loans)
- Charitable Contributions (e.g., Combined Federal Campaign donations)
- Family Support (e.g., direct deposits to a spouse’s or dependent’s account)
5. Leave Summary
Tracks:
- Accrued Leave: Days available
- Used Leave: Days taken
- Use-or-Lose Leave: Days that must be used before the fiscal year ends
- ETS (Expiration of Term of Service) Date: Important for reenlistment planning
6. Federal and State Taxes
Shows taxable wages and amount withheld, essential for tax planning and home loan pre-approvals.
- Exemptions: If you qualify for tax exemptions (e.g., combat zone tax exclusion), they will be reflected here.
7. Retirement & TSP Contributions
Displays your contributions toward military retirement and savings, which can impact long-term financial planning.
- Blended Retirement System (BRS) Contributions
- Employer Matching Contributions (for BRS participants)
Using Your LES for Real Estate and Investment Planning
Your LES is a valuable tool when buying a home or making investment decisions. Here’s how you can use it:
✔ For Mortgage Applications: Lenders review your LES to determine your stable income, BAH for housing costs, and deductions to assess affordability.
✔ For Budgeting: Understanding your net income helps in managing expenses and savings.
✔ For Investment Planning: Evaluating special pay and allowances can aid in deciding on real estate investments.
✔ For VA Loan Qualification: The VA loan program allows eligible service members to buy a home with no down payment and favorable interest rates based on stable income.
Example: Determining Mortgage Affordability
If your total take-home pay is $4,464 after deductions, and lenders typically recommend spending no more than 30% of gross monthly income on a mortgage payment, your target monthly payment should be around $1,762.
Pro Tips for Managing Your Military Pay
- Monitor Your LES Monthly: Ensure accuracy in pay, deductions, and allowances.
- Utilize TSP Contributions: Take advantage of matching contributions for long-term savings.
- Plan for PCS (Permanent Change of Station) Moves: Use BAH adjustments to align housing costs.
- Understand Combat Zone Tax Benefits: Certain deployments make income tax-free.
- Use Online Mortgage Calculators: Determine affordability based on LES figures.
- Check for Bonus Pay Opportunities: Certain roles and reenlistments offer additional incentives.
Conclusion: Taking Control of Your Financial Future
Understanding your LES is a game-changer for financial planning. Whether you’re applying for a mortgage, budgeting for expenses, or considering investments, decoding this document empowers you to make informed decisions.
💡 Next Steps:
- Review your latest LES and check for accuracy.
- Use a mortgage affordability calculator to estimate your home-buying budget.
- Consult with a real estate professional for tailored advice on using your military income for property investment.
By mastering your LES, you’re not just tracking your earnings—you’re building a roadmap to financial success!
