The basic pay of a member of the U.S. Armed Forces is determined by the grade or rank of the member and his years of service. The basic pay may also be affected by the type of service the member is performing, such as active duty or reserve drill.
Types of additional pay are known as special or incentive pays. These moneys are for specific types of duties, such as those performed by pilots or parachutists. There are also specific types of pay for dangerous or hardship duties, which are used to recruit and retain personnel with special skills. As of 2015, there were over 60 special and incentive pay categories. The requirements to meet the criteria for special or incentive pay are set by Congressional action from year to year.
Another important part of military pay is allowance pay. These are funds provided for particular needs, such as food or housing. The government either provides these needs or offers moneys for the member to meet these needs according to the individual. Because the military cannot always provide housing for all its members and their families, for example, housing allowances are provided for the member to find appropriate accommodations in the commercial market. Other type of compensation includes pay for wounds and injuries, and allowances are for the most part tax-free.