Selling leave is a topic that comes up a lot around life transitions. It’s best to think about when selling leave might be useful, the tax implications of doing so, and other considerations before you’re “in the moment.”
In general, one day of leave is equal to your base pay divided by 30. Only base pay is used, and no other pay is included in the calculation.
The biggest thing to remember is that your leave is worth a specific dollar amount. The common argument against selling leave is that you don’t get paid for BAH or BAS. This is misleading. You’ll be paid the same for a 30-day period regardless. Selling leave simply trades a day of leave earned for money instead.
When you can sell leave
For most service members, opportunities to sell leave occur when reenlisting or leaving service. Unless you are leaving the military, it’s important to think about the long-term implications of selling leave. Once you sell leave, you can’t buy it back.
Limitations on selling leave
There is a lifetime limit on the amount of leave you can sell. You can only sell up to 60 days of leave over your entire career, which should be a consideration if you think you’ll want to sell any leave later.
There are some exceptions to the 60-day rule, but you need to understand that you may run into administrative headaches. As with anything, just because something is allowed doesn’t mean the process will go smoothly.
Special leave accrual one-time payment
There is also an option for enlisted service members to sell excess leave through special leave accrual (SLA). You can sell leave in excess of the SLA cap to avoid forfeiting leave. The 60-day lifetime limit still applies, and this option can only be chosen once in a career.
Other types of leave and service-specific rules
There are also some types of leave, such as parental leave, which cannot be sold or carried over past one year. There are always changes and exceptions, so check with your service’s current guidance for processing procedures and rules.
Tax implications
Leave is taxed as ordinary income. This can be especially important to remember if you’re already in a higher tax bracket or if you’re in a combat zone. You may be able to leverage your tax situation to your advantage.
For enlisted service members and warrant officers, there is no cap to the combat zone tax exclusion (CZTE). For officers, the CZTE is capped at the highest enlisted base salary, plus any imminent danger or hostile fire pay.
Creative ways to use money from selling leave
Selling leave can be beneficial. If you’re leaving service with debts, you might need the money more than the days off. This is especially helpful if you owe the government money when you’re exiting service.
If you’re trying to save extra for retirement, selling your leave could help you increase your Thrift Savings Plan (TSP) contributions.
Plan your life before selling leave
The biggest thing to remember about selling leave is it’s just an asset you have at your disposal. There may even be times when selling leave could be the most cost-effective solution, but not the most beneficial to your life. It’s best to think of leave as an earned benefit, just like any other form of pay or entitlement. There are some unique ways to make the most efficient use of leave throughout your career, but it’s only important in the context of what you’re trying to accomplish.
