HomeCivilianEmployeescivreloCivilian-Moving-Expenses-Tax-DeductionBackground

Tax Cuts and Jobs Act Background

The Tax Cuts and Jobs Act, or TCJA, of 2017 took effect on Jan. 1, 2018. It made most civilian permanent change of station entitlements taxable. The TCJA does not affect military moves. 

Beginning in February 2018, DFAS advised all employees who received reimbursement of PCS expenses in 2018 that taxes under the TCJA had not been withheld from their reimbursements, and an adjustment to their tax withholding may be required due to the change in the tax law.

In May, the General Services Administration issued a Federal Travel Regulation Bulletin which describes how the TCJA applies to PCS reimbursements. The bulletin stated that civilians who moved after Jan. 1, 2018, and incurred all of their expenses and received all of their reimbursements in 2018, are subject to the new tax. 

On Oct. 30, 2018, DFAS began withholding taxes on PCS reimbursements under the TCJA. PCS reimbursement claims processed by DFAS on or after Oct. 30, 2018, had taxes withheld in accordance with the TCJA. 

On Oct. 30, 2018, DFAS also began to compute tax withholding owed under the TCJA on PCS reimbursements paid in 2018 prior to Oct. 30. DFAS issued SmartDoc statements via email to notify employees who received reimbursements prior to Oct. 30 whether TCJA application would result in a tax withholding debt. 

For travelers who received a travel expense reimbursement in 2018 for a claim processed before Oct. 30, 2018, DFAS calculated the tax withholdings owed under the TCJA and is remitting the withholding to the IRS on the travelers’ behalf. Such travelers will owe debts to DFAS for the tax withholdings submitted on their behalf. 

Those employees with tax withholding debts received an Advice of Payment in their myPay account in November 2018. This AOP is not a formal debt letter. Employees are not required to pay the debt until the formal debt letter is issued. 

For all travelers with PCS orders issued in 2018, the traveler’s W-2 showed that the PCS reimbursements taxable under the TCJA were gross income and listed the associated tax withholdings that were remitted to the IRS.

If eligible, employees who had a PCS claim paid in 2018 were able to file a claim for Relocation Income Tax Allowance after filing their 2018 taxes. The RITA is designed to reimburse most of the Federal and State income taxes paid as a result of a PCS transfer.

Page updated January 6, 2020