Overseas Cost-of-Living Allowance

Service members serving outside of the continental United States (OCONUS) where the cost of living is higher than CONUS receive an Overseas Cost-of-Living Allowance (COLA). Overseas COLA is a non-taxable allowance designed to offset higher prices of non-housing goods and services OCONUS and equalize purchasing power with members stationed in CONUS. It does not reimburse expenses, compensate for remoteness, hardship, loss of spousal income, or non-availability of goods and services.

OCONUS COLA is not a fixed amount and should not be considered in household budgeting. Fixed expenses, such as car payments, should be based on what a Service member can afford without the allowance. Overseas COLA will fluctuate based on the exchange rate and can increase or decrease from pay period to pay period.

COLA is paid in U.S dollars but some expenses are typically paid in foreign currency. Learn more about currency fluctuations and adjustments.

Refer to the DoD Overseas Station and Housing Allowance Process Guide [PDF, 25 pages] for information on the COLA survey schedule, COLA Unique Expenses, and the responsibilities of the Country Allowance Coordinator.

Lookup rates using the Overseas COLA Calculator.

The Department collects shopping data directly from Service members through a Living Pattern Survey (LPS). These location-specific surveys are conducted every three years on a rotational basis. Find active surveys.

Representatives at DoD COLA locations also collect local price data on approximately 150 goods and services (market basket items) in what’s known as the Retail Price Schedule (RPS) every year.

The Department compares the overseas LPS and RPS data with similar data obtained in CONUS. Data is obtained from the Bureau of Labor Statistics Consumer Expenditure Survey, which details how U.S. military families allocate their spendable income across all COLA types of goods and services, to set weights or levels of importance within the COLA market basket. This ensures costs for necessities like car insurance, gasoline, and day care, are given stronger consideration than non-necessities in the COLA calculation.

The CONUS weighted average cost for each market basket item is compared to the OCONUS weighted average cost, determined by the LPS and RPS, to produce an index for each item.

The index for each item in the market basket of goods and services is individually weighted and summarized aggregated to reach the final location COLA index. This final index indicates how much more expensive it is to purchase COLA types of goods and services in an overseas OCONUS location than it is to purchase the same level of goods and services in average CONUS (e.g., an index of 120 at an overseas OCONUS location means that it is 20 percent more expensive to purchase COLA types of goods and services than in average CONUS.)

COLA is adjusted annually, based on LPS/RPS data:

  • Service Compensation Representatives of the eight Uniformed Services review and approve of all COLA changes based on LPS/RPS data
  • COLA increases are implemented the next pay period
  • COLA decreases are phased in at two points per month, after a 45-day information campaign, to minimize impact

COLA can change as often as every pay period, based on currency fluctuations:

  • Service Compensation Representatives of the eight Uniformed Services review all COLA changes based on currency fluctuations
  • COLA increases and decreases are implemented the next pay period
  • Changes in exchange rates (where appropriate) are applied to the portion of the COLA index that reflects local currency purchases. Learn about currency fluctuations and exchange rates.

Overseas COLA is paid as a percentage of spendable income, rather than total income.

  • Spendable income is Regular Military Compensation minus housing, taxes, savings, life insurance, gifts and contributions
  • Spendable income varies from member to member based on rank, years of service, and number of dependents
  • Spendable income is derived from Bureau of Labor Statistics Consumer Expenditure Survey data, which carefully details how military families allocate their spendable income across all COLA types of goods and services.

In some areas OCONUS, a Service member or dependent incurs mandatory and excessive expenses that a Service member based in the CONUS never incurs. Since the expenses are not incurred in the CONUS, they cannot be a part of the ordinary COLA index calculation. For these expenses, payment is a dollar-for-dollar reimbursement for a specifically authorized expense at a designated authorized location.

Locations approved for COLA Unique Expenses are listed in Table 68-2 of the DoD FMR, Volume 7A, Chapter 68 [PDF, 47 pages]. The most up to date locations are:

Country Expense Effective Date
Singapore 1. Mandatory and excessive road tax for one POV JUN 2, 2008
2. Mandatory and excessive registration and transfer fees for one POV