When you perform a Civilian Permanent Change of Station (PCS) with the government, the Internal Revenue Service (IRS) considers the majority of your entitlements to be taxable.
The Tax Cuts and Jobs Act of 2017 made additional entitlements taxable. Most entitlements are now taxable. Find out more here
Taxable reimbursements include:
- En route travel, lodging, meals and transportation including individually billed account/personally procured airfare, government-issued airline tickets-commercially billed account, privately owned vehicle mileage, tolls, taxis, etc.
- All House Hunting Trip (HHT) expenses, including Government Procured Airfare and per diem
- All Temporary Quarters Subsistence Expenses, or TQSE including lodging and meals
- All real estate expenses
- Non-temporary household goods storage (CONUS)
- Temporary HHG Storage
- Miscellaneous Expense Allowance
- Relocation services (i.e., Home Marketing Incentive Payments, Property Management, etc.)
- Withholding Tax Allowance
- Relocation Income Tax Allowance
- Household Goods Shipment (HHG)
- Privately Owned Vehicle (POV) Shipment (CONUS)
- Mobile Home Transportation
The Relocation Services Company home sale program remains non-taxable. Under this program, residences of transferees are purchased under a RSC supplier contract and then sold in a separate independent transaction. The cost of those residential sales will continue to be governed by IRS Revenue Rule 2005-74 and are not taxable income to employees.
Additionally, expenses for extended (non-temporary) HHG storage for employees assigned to OCONUS locations are tax exempt. Allowances for POV shipment to, from, and between OCONUS posts of duty are also exempt from taxation.
A mandatory 22% Federal Income Tax Withholding (FITW), applicable 6.2% FICA Tax and 1.45% Medicare Tax is withheld from all taxable entitlements and deposited with the Internal Revenue Service (IRS). State and Local taxes are not withheld; consult with your local tax advisor to determine if your PCS wages are taxable under your state and local governments current regulations.
The Relocation Income Tax Allowance (RITA) is available to reimburse substantially all of the Federal, State, and Local taxes to all employees who incur taxable PCS entitlements after they receive their Travel W2 and file Federal, State and Local Taxes. See how to file a RITA claim here.
Reimbursements are taxable to you in the calendar year that receive them, not the year the expense is incurred. For the above taxable items, DFAS issues a PCS W-2 by January 31 following the year of reimbursement.
Click below for Step 3, the Civilian PCS Entitlement Guide
Return to Civilian PCS Home
Page updated June 29, 2020