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.
The purpose of the Relocation Income Tax Allowance (RITA) is to reimburse employees for any taxes that are owed that were not adequately reimbursed by the Withholding Tax Allowance (WTA) rates. The WTA calculation is based on the income tax withholding rate applicable to supplemental wages. This may be higher or lower than your actual tax rate. The RITA, on the other hand, is based on your marginal tax rate, determined by your actual table income and filing status, which allows the DoDEA to reimburse you for substantially all of your Federal income taxes. The RITA also reimburses you for any additional state and local taxes that you incur as a result of your relocation, because they are not reimbursed in the WTA process.
Things to know:
RITA Voucher Submission:
DFAS has updated their website to reflect the RITA tax law changes. See below:
RITA Eligibility Expansion: A recent change in the law expands RITA eligibility to include four categories of travelers who were previously excluded: New appointees; Senior Executive Service employees performing a “last move home”; Individuals returning from an overseas assignment for the purpose of separation from Government Service (Return Rights will fit under this category); and Individuals assigned under the Government Employees Training Act.
The change in law, which occurred December 20, 2019, became effective as of January 1, 2018. If employees paid taxes on civilian relocation entitlements which were reported as taxable income on a 2018 and/or 2019 W-2 or W-2C, they are now eligible to file a RITA claim.
The following DFAS link provides all the updated info concerning a RITA claim to include a Youtube video that provides instructions on how to fill out a RITA claim:
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: