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What are the benefits to using leave or selling leave
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Transition
Leave
Transition Leave
Posted 10 y ago
Responses: 11
Financially, selling your leave will put you in a better situation. However, not everybody wants to be hanging around their unit until the very last day.
Let's say you have 60 days before getting out and 60 days of leave...
Scenario 1: You use your leave, which mean that you were on leave for 60 days and got your normal paycheck during those 60 days. At the end of it, that's all there is.
Scenario 2: You don't use your leave, which means you worked for those 60 days and still got you normal paycheck during those 60 days, but then you get the bonus of 60 days of base pay at the end of it.
In the end, you will make more money selling your leave. However, some people may feel awkward hanging around their unit for 60 days before getting out if they are not contributing much, and may feel like it's better to just rip the band aid off and move on... so that would depend on the individual's situation. From a financial point of view, it would always be better to collect pay and BAH while still serving, and then selling your leave afterwards.
EDIT updated: As correctly pointed out by TSgt Joshua Copeland, if you plan to basically not take time off and start a new job during your terminal leave and it pays at least as much as your total salary now, then you will make more by not selling your leave and just sliding right into your new job while on terminal leave. However, that also means no time off after 20+ years of service, which may not be desirable.
Let's say you have 60 days before getting out and 60 days of leave...
Scenario 1: You use your leave, which mean that you were on leave for 60 days and got your normal paycheck during those 60 days. At the end of it, that's all there is.
Scenario 2: You don't use your leave, which means you worked for those 60 days and still got you normal paycheck during those 60 days, but then you get the bonus of 60 days of base pay at the end of it.
In the end, you will make more money selling your leave. However, some people may feel awkward hanging around their unit for 60 days before getting out if they are not contributing much, and may feel like it's better to just rip the band aid off and move on... so that would depend on the individual's situation. From a financial point of view, it would always be better to collect pay and BAH while still serving, and then selling your leave afterwards.
EDIT updated: As correctly pointed out by TSgt Joshua Copeland, if you plan to basically not take time off and start a new job during your terminal leave and it pays at least as much as your total salary now, then you will make more by not selling your leave and just sliding right into your new job while on terminal leave. However, that also means no time off after 20+ years of service, which may not be desirable.
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LTC Yinon Weiss
TSgt Joshua Copeland - I'm not familiar with the tax implications. I assume one has to pay their marginal bracket tax bracket on all base pay, whether it's sold or not. Even if you don't sell it, you still have to pay the 25% tax while on terminal leave... ? If 25% is too high, you'll just get back the difference when doing taxes. Or am I missing something again?
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TSgt Joshua Copeland
There is an automatic tax of 25% on selling terminal leave. For every member, that is significantly higher taxes on normal pay and BAH/BAS are non-taxable incoming.
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LTC Yinon Weiss
TSgt Joshua Copeland - Right, but you only pay the 25% tax on the base pay, and you've got to pay the 25% tax on the base pay even if you go on terminal leave and not sell it. BAH/BAS don't really come into play, since taxes are always on the base pay... whether you sell them or use them.
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TSgt Joshua Copeland
LTC Yinon Weiss, on terminal, you only pay whatever your normal tax liability is. For nearly all military members (outside of those investing, independently wealthy) is dramatically less.
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Use it and get the bennies that come with it. Things like BAH, BAS, etc. If you sell it, all you get is the base pay. I think the traditional advice is to use it as terminal leave and collect the extra money you are due.
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