Our guest is Chrissy Laycock, an Army Brat, Air Force spouse, and proud Army mom! I’m a full-time accountant and live in Virginia.
DoD Updates: DPS is having some issues with logging in and getting the page to load. This has been happening for people trying to set up a move or file a claim, and TRANSCOM is aware of it and working on a fix. If you have access to a military work computer, there are fewer issues. The best browser to use is Internet Explorer. So if you’re having trouble, you aren’t the only one!
PCS and taxes can be complicated. Can PCS expenses be claimed on taxes?
Yes, some but not all travel expenses for PCSing can be claimed on your taxes. It depends on the location and the type of move, so you have to know what is allowed.
If you are doing a PPM, most of your expenses are reimbursed, and that income is taxable. Whatever the military reimburses, you can’t claim as a deduction on your taxes.
As a family goes through a PCS, what receipts, documentation or other files should a person be keeping that they would need come tax season?
Receipts, receipts, receipts!!! If you’re doing it yourself, keep all receipts: weight tickets, gas, any vehicle maintenance to prep for the move. Any prep work for the members of the household such as immunizations can be claimed. What the military covers may not be the same as what you can claim on your taxes. Anyone you can claim as dependents can be claimed on your taxes, even if they aren’t DEERS dependents.
You’ll also want to refer to the orders, IRS Publication 3 (Armed Forces Tax Guide), form 3903 (Moving Expenses), 1040 Schedule 1 (adjustments to income), DD1351-2 Relocation Income Tax Allowance (RITA), W-2, Travel W-2 for documentation about taxes.
What expenses can be claimed on taxes?
You can only claim what the military does not reimburse you for: Non-reimbursed “reasonable” travel expenses related to the move for any member of the household, including pets.
Temporary Dislocation Allowance: the military covers up to 10 days total, but if you are out of your house longer than that for any reason (buying, selling, cleaning, waiting on base housing, etc.) you can claim the additional expenses for the extra days outside of the ones the military reimbursed you for.
Storage and insurance: 30 consecutive days after the day the goods are moved from your former home and before they are delivered to your new home. The military doesn’t reimburse insurance, so you can claim that. Remember not to cancel your insurance policy when you move! Always wait until you arrive at the new location to adjust or roll over your claim.
Travel: lodging (within limitations), airfare or mile reimbursement and expense (actual costs of gas and oil or a rate of 17 cents a mile), plus parking and tolls. You can’t claim a Disney vacation for a PCS move reimbursement. You have to move within reason from Point A to Point B.
Foreign moves have increased limitations for lodging, travel, and storage.
The military is not the IRS, so even though some of the rules overlap, remember that some of the rules are different, so it’s important to research the rules specific to your taxes and moving situation.
If you choose to stop by another location and pick up household goods from a 3rd location (family member’s house, geo-bach location, etc.) then the military won’t reimburse that pickup, so it can be deducted on taxes.
If living on base housing and a full cleaning is required, you may be able to claim the expense of hiring a cleaning service since the military requires but does not reimburse this expense.
You can learn more about what PCS expenses will and won’t be taxed here.
What expenses cannot be claimed on taxes?
Meals, any already reimbursed expenses, non-reasonable travel expenses, expenses for someone outside your household, goods acquired along the way to your new location.
Reimbursements received in excess that are greater than actual expenses incurred must be claimed as income on line 1 of form 1040.
The military does not reimburse shipping cars CONUS, but they do cover some car shipments for OCONUS locations. If you moved OCONUS and the military covered or reimbursed the car shipment, then you cannot deduct it on taxes.
You cannot claim the cost of replacing pantry items and other items that you throw out before the move.
You can’t claim expenses that are unrelated to the actual move: home repairs before moving out and selling, security deposits and first month’s rent at the new location, etc.
What PCS payments will a service member receive a W-2 for?
Reimbursement for a non-personally procured move (PPM, formerly DITY) will show as income on your normal W-2 and are subject to taxes. Travel reimbursements for a PPM move don’t appear on your W-2, you will receive an additional document called a W-2T or a Travel W-2. Be warned that this may come in the mail later than your original W-2, so wait to file taxes until you receive the W-2T, which is supposed to be postmarked by January 31st. Check your branch finance website to see if it is listed there. Your travel vouchers were originally filed through your finance office. You can also contact DFAS because they issue your W-2 and other tax information.
What year do I include my PCS in my taxes? Is it the same as the year I move?
If you moved in 2020 and received the income in 2021, you usually would not include it until you pay your 2021 taxes (in 2022.) However, it does depend on how you file your taxes. Most people use the cash basis, but if you use an accrual basis of accounting, you may file it earlier. The dates affect more people who move later in the year and may receive some portion of payment in one year, and the rest of the DitY/PPM payment in 2021. In that case, file the income in the year where you received it, in two separate years.
Many people claim at least a partial PPM (DitY) that is taxed when paid to them. Are there ways to reduce the amount of tax?
Sadly, no. The current tax rates for PCS reimbursements are 22% Federal, 6.2 % SS tax, and 1.45% Medicare tax. State and local tax is not taken out prior to you receiving the reimbursement so check with your tax preparer to see if you are subject to state and local tax as it varies by location. However, if your expenses exceed the amount of your reimbursement, that amount can be used to reduce your tax liability. Also, you can possibly be refunded all of the taxes paid, for all travel reimbursements, in the following tax year by filing for a RITA (Relocation Income Tax Allowance) reimbursement. You can apply for this the year after you move, and if you are accepted, then you will receive the entire amount of your state and local taxed quantity back. This is generally for civilian government employees, but can apply to service members.
What is the biggest piece of advice you can give to a family embarking on their PCS, or preparing their taxes?
Prepare, Prepare, Prepare! Research early and often. Learn as much as you can and consult professionals when in doubt or for clarification. There is no such thing as being too prepared or having too much information. A lot of things are determined about your specific locations and your family situations. You are taxed federally, but not typically for state and local. When in doubt, ask. It may be worth it to spend the money for a tax professional so you have less stress and no confusion about the laws.