Tax Cuts and Jobs Act of 2017 made most civilian permanent change of station (PCS) entitlements taxable. law eliminated a number of deductions including the moving expense deduction for federal civilian employees. This Congressional Act eliminated the deduction for the tax year 2018 through the tax year 2025. This change does not apply to military personnel, but does apply to Department of Defense civilian employees.
Most moving benefits paid in 2018 to Federal civilian employees will now be taxable to the employee, regardless of whether the employer reimbursed the employee for their out-of-pocket moving expenses or paid the moving company directly.
For Federal civilian employees, some of this tax burden may be offset by the Relocation Income Tax Allowance (RITA). This entitlement reimburses DoD civilian employees for eligible federal, state and local income taxes incurred as a result of receiving taxable relocation benefits. RITA does not apply to new government employees or employees returning from an overseas assignment for the purpose of separation from Government service. Unfortunately, RITA itself is also considered to be taxable income and there is no additional benefit or offset to reimburse civilians for that tax burden. RITA is not automatic and the employee must apply for RITA in the year after receiving taxable travel pay.
Since many DoDEA employees move at some point in their career, it is important for all employees to be aware of the change in the law and have access to resources for employees who may be affected now or in the future.
The best source of information on this important change is the Defense Finance and Accounting Service (DFAS). Employees are encouraged to visit the DFAS website and to use the processes they have in place to address questions.
The DoDEA point of contact for related questions is Ms. Karen Johnson, DoDEA Resource Management, at (571) 372-1498 or at Karen.Johnson@hq.dodea.edu.
On December 22, 2017 Congress passed Public Law 115-97 suspending the tax deduction for civilian moving expenses. The Tax Cuts and Jobs Act (TCJA) of 2017 made most PCS entitlements taxable. Entitlements will now be reported as taxable income to the Internal Revenue Service (IRS).
All PCS expense payments are taxable except some of the following entitlements: