The GSA has proposed to reimburse more categories of federal employees for additional taxes they may owe on the value of relocation payments such as reimbursements for the expenses of traveling to the new duty station and for storage and shipment of household items.

Proposed rules in the June 15 Federal Register relate to a series of policy changes starting with the wide-ranging tax law enacted in late 2017 that made almost all relocation payments taxable as ordinary income. GSA later told agencies to reimburse employees for “substantially all” of that extra tax liability through tax allowances but that applied only if the individual was being transferred for permanent duty.


That left out taxes on payments to employees who relocated for several other possible reasons, primarily returning to the U.S. from work overseas to retire and the SES “last move home” entitlement. The rules would implement language in the 2020 DoD authorization law to extend tax reimbursement to those situations.

They call for agencies to pay the additional tax allowances for all situations retroactive to the start of calendar year 2018 when the previous year’s law took effect and would make several technical changes to relocation payment policies.

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Federal Manager’s Handbook, 6th Ed.