Ask a JAG: Civilian PCS moves, relocation expense reimbursements

By Capt. Nicole A. Oberjuerge
Judge Advocate and Chief of Client Services
Stuttgart Legal Center

Q:  I PCS’ed OCONUS.  How does the new tax law affect me?

A:  While most people snooze as soon as the words tax and law are mentioned, if you are a civilian employee and the U.S. Government moved you OCONUS, or is moving you back to CONUS, now is not the time for a nap.

For civilian employees, if the government moved you on military orders, be prepared for a significant increase in your taxable income this year because of the new tax law. Active duty service-members, feel free to continue snoozing as moving expenses are still excludable from your gross income and are not subject to income taxes.

OCONUS household goods (HHG) shipments can cost more than $25,000. Airfare for a family can exceed $5,000. As OCONUS PCS moves are particularly costly, civilian employees will receive a hefty bill for taxes owed.

Public Law 115-97, Tax Cuts and Jobs Act of 2017, effective Jan. 1, 2018, temporarily repeals the tax exempt status of the qualified moving expense reimbursement fringe benefit. In plain English, starting in 2018, the IRS is including most of the expenses associated with moving, e.g. lodging expenses for en route travel, airline tickets, shipment of household goods and shipment of POVs, as part of government civilian employees’ gross income. An amount added to an individual’s gross income is taxable unless exempted by law.

What can you do?
First, you have to pay. There is no exception to policy. Relocation expenses are subject to 22 percent IRS income tax withholding by DFAS, and will be withheld from an employee’s travel settlement payment amount or billed to the employee as a debt.

However, civilian employees can also apply for relief via the Relocation Income Tax Allowance (RITA), which reimburses eligible employees for the additional income taxes incurred as a result of receiving taxable travel income. RITA is not automatic. Eligible employees must apply for RITA in the year after receiving taxable travel pay.

Finally, if you have not moved yet, but will likely move soon, you can decrease the cost of your move by taking the following actions: losing HHG weight, declining unaccompanied baggage, not shipping a POV, and not storing HHG.

Got a taxing question?
If you have additional questions about tax implications of a recent PCS move, contact the Legal Assistance Office on Kelley Barracks at 421-4152 or 0711-7294152.