Civilian Permanent Change of Station (PCS) Tax Information
The Internal Revenue Service (IRS) considers the majority of your PCS entitlements to be taxable. As a result, we advance payments on your behalf and remit taxes owed to the IRS, which later results in a debt you owe back to DFAS. This page will help you understand what entitlements may be taxable, key dates that impact future taxes, and how to file for potential tax reimbursement through RITA. Because each tax situation is different, it is best to consult with a tax professional for advice on your specific circumstances.
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As a federal civilian employee most reimbursements you receive, either directly or as payments to a third-party vendor, are taxed as income. This applies to CONUS and OCONUS moves. Common Taxable PCS Entitlements (Reimbursements) include:
- En route travel, lodging, meals and transportation including individually billed account/personally procured airfare, government-issued airline ticks 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 (TQSE) including lodging and meals
- All real estate expenses
- Household Goods Shipment (HHG)
- Temporary HHG Storage
- Non-temporary household goods storage (CONUS only)
- Miscellaneous Expense Allowance (MEA)
- Relocation services (i.e., Home Marketing Incentive Payments, Property Management, etc.)
- Withholding Tax Allowance
- Privately Owned Vehicle (POV) Shipment (CONUS only)
- Mobile Home Transportation
- Relocation Income Tax Allowance (RITA)
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Per the IRS Publication 15-B, there is a special accounting period, which allows DFAS to report benefits provided during the last two months of the calendar year (November and December) as paid during the following year. As a result, any payments we make to vendors on your behalf from Nov 1st – Dec 31st will be treated as paid in the next tax year and reflected on that year's W-2. This helps prevent and reduce corrected W-2s and amended tax returns for you. |
A few specific allowances remain non-taxable, particularly for moves overseas (OCONUS). Non-Taxable Entitlements (Reimbursements) include:
- Relocation Services Company (RSC) Home Sale Program: The gain from the sale of a residence through an agency-sponsored home sale program is not taxable.
- Extended HHG Storage (OCONUS): Non-temporary storage of household goods for employees assigned to an OCONUS location is tax-exempt.
- Privately Owned Vehicle (POV)Shipment (OCONUS): The cost of shipping your POV to, from, and between OCONUS duty locations is not taxable.
We automatically withhold the following federal taxes from your PCS reimbursements:
- Federal Income Tax Withholding (FITW): A mandatory 22% is withheld.
- Social Security Tax or Federal Insurance Contributions Act (FICA): A 6.2% tax is applied.
- Medicare Tax: A 1.45% tax is applied
We do not withhold state or local taxes on taxable PCS expenses. Consult with your local tax advisor to determine if your PCS reimbursements are taxable under the laws of your state and locality and pay any required taxes to avoid penalties.
Throughout your PCS move we will communicate important events, including dates that impact your taxes. Click the below to learn more about the timeline and when you should hear from us. Below are some key dates to keep in mind when you PCS.
- September: We begin processing third party payments made to vendors on behalf of the traveler.
- October: We will notify you via a myPay SmartDoc email notification about any third-party payments made and remit taxes owed to IRS on your behalf.
- October - December:
- Advice of Payment (AOP) notifications will be issued via myPay. You will receive electronic myPay notification once DFAS processes claim.
- You’ll receive a second email notification that claim has processed and that the traveler debt letter will be mailed.
- January: Demand letters are emailed to the impacted travelers.
- February: Debt letters are mailed to the correspondence address listed in myPay. One way we communicate important information pertaining to your account is by mail. To ensure you receive timely communications, please update your mailing address with DFAS by visiting myPay and selecting “Mailing Address” in the side menu.
To help offset some of the federal income tax burden from your PCS, you can file a Relocation Income Tax Allowance (RITA) Voucher. RITA reimburses recently relocated employees MOST of the additional Federal, State, and local income taxes incurred because of receiving taxable travel income. Click the below to learn more about RITA or how to file.
When Should I File for RITA?
The filing timeline follows a two-year process:
- Year of move (Year 1): Your agency pays for or reimburses your relocation expenses. You will receive a Travel W-2 in January of the next year, which reports your taxable travel wages and the Withholding Tax Allowance (WTA).
- Year after move (Year 2): First, File your personal income tax return (Form 1040) using the Travel W-2 and your regular W-2. Once you have completed your tax return, you can submit your RITA claim. The deadline for filing is typically within 120 days of the new calendar year. Filing a RITA claim is mandatory if you opted for the WTA. Failure to file a timely claim will result in a debt owed to DFAS and collection of the entire amount of WTA paid on your behalf.
Keep in mind…
- A W-2 is issued for travel payments based on the year the travel payment is made. If an additional payment is made for a claim that already received a W-2, you will then receive a W-2C.
- All travel W-2s (including W-2C) must be included in your taxable income on your IRS Form 1040 to be eligible for RITA. and the calculation is based on taxable income from the IRS Form 1040 (after exemptions and deductions) and the IRS published tax tables.
- The final RITA payment you receive is also taxable income. You will receive a W-2 for this payment and must report it on your tax return in the year the payment is made.
What do I Need to File RITA Voucher?
The process requires careful record-keeping and is managed through DFAS, not the IRS. The following documents should be included in your RITA Voucher.
How do I File a RITA Voucher?
SmartVoucher makes it easier to submit a RITA voucher. Simply login to SmartVoucher with your CAC or myPay UserID and password. Select "Create New Voucher“ and follow the prompts.
Update Your Mailing Address
One way we communicate important information pertaining to your account is by mail. To ensure you receive timely communications, please update your mailing address with DFAS. To quickly and securely update your address, visit myPay and selecting “Mailing Address” in the side menu.
Check Travel Voucher Status
Check your travel voucher status using a CAC enabled computer.
Do you Need Additional Help?
For additional assistance or to contact us, visit DFAS Customer Service.
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Page Updated: Oct 3, 2025