Taxable Entitlements

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Taxable Entitlements

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 changed what entitlements are taxable. Most entitlements are now taxable. Find out more here.

Taxable reimbursements include:

  1.  Enroute travel, lodging and transportation including IBA/personally procured airfare, government issued airline tickets-CBA, POV mileage, tolls, taxis, etc.
  2.  All House Hunting Trip (HHT) expenses, including Government Procured Airfare
  3.  All Temporary Quarters Subsistence Expenses, including lodging and meals
  4.  All Real Estate expenses
  5.  Household Goods (HHG) storage, including storage procured with a TMO
  6.  Miscellaneous Expense Allowance (MEA)
  7.  Relocation Services (i.e., HMIP, Property Management)
  8.  Withholding Tax Allowance (WTA)
  9.  Relocation Income Tax Allowance (RITA)
  10.  Household Goods (HHG) Shipment - Government Bill of Lading
  11.  Privately Owned Vehicle (POV) Shipment
  12.  Mobile Home Transportation

Per current guidance, expenses for extended HHG storage for employees assigned to OCONUS locations are tax exempt. We anticipate updated guidance addressing whether OCONUS HHG shipment is tax exempt, but we do not have it yet. Additionally, allowances for POV shipment to, from, and between a CONUS post of duty and an OCONUS post of duty, as well as POV shipment between OCONUS posts of duty, are not taxable. However, expenses for transportation of an employee’s POV within CONUS are taxable.  

Non-taxable

The Relocation Services Company (RSC) home sale program remains non-taxable. This program is where 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 Internal Revenue Service (IRS) Revenue Rule 2005-74 and are not taxable income to employees.

Applicable Taxes

A mandatory 22% Federal Withholding Tax (FWT), 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 offset the impact of taxes to all employees who incur taxable PCS entitlements after they receive their PCS 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. 

Page updated November 30, 2018