Terminal Leave and Selling Back Leave When You Get Out

What it is

DoD lists three ways to handle leave you have not used when you transition:

1. Use it before you leave, with approval.
2. Sell it back. You get a cash payment for unused leave if you retire or separate with an honorable discharge.
3. Terminal (separation) leave. DoD says it is just like regular leave, except you do not have to report back to your duty station after it ends.

Selling leave back: the 60-day limit

• You can sell back up to 60 days of leave over your whole career (DoD, and 37 U.S.C. 501). Days paid earlier in your career count against the 60.
• Enlisted members can sell back on reenlistment or on separation with an honorable discharge. Officers can sell back only when separating under honorable conditions.
• Leave you are still holding above 60 days at the end of a fiscal year is a problem. DFAS says a member may not carry forward more than 60 days into a new fiscal year, unless a special exception applies.

Taxes on the payment

An Army Military Pay Office separation briefing (Fort Cavazos, 2023) says lump-sum payments such as accrued leave are taxed at 22 percent federal plus the state rate. The IRS says the flat withholding rate on supplemental wages under $1 million is 22 percent for 2026. That is withholding. Your final tax can differ. Ask your pay office how your payment will be handled.

Terminal leave: how it works

• Your pay and allowances continue while you are on terminal or transition leave (Army pay office briefing).
• You are still in the service until the leave ends.
• Federal job: 5 U.S.C. 5534a lets a service member on terminal leave accept a civilian position in the U.S. Government, or the District of Columbia government, and receive that pay in addition to military pay and allowances for the rest of the terminal leave. You can also accrue annual leave.
• Private job: Neither DoD's leave page nor Army Regulation 600-8-10 (paragraph 4-9, terminal leave) says anything I could find about working for a private employer. An Army installation ethics briefing says working for a contractor or private company during transition leave is permitted as long as there is no conflict of interest, and treats it as off-duty employment. That briefing is not the regulation. This page could not confirm the rule from the regulation itself. Before you start, ask your unit commander (who approves terminal leave under AR 600-8-10) and your installation ethics counselor at the Staff Judge Advocate office, and get the answer in writing.
• Terminal leave in the Army: AR 600-8-10 says terminal leave is ordinary chargeable leave, begins after you finish out-processing, and ends on the same calendar day as your discharge or retirement date.

Transition leave and PTDY: who gets it

Permissive temporary duty (PTDY) is separate from leave. DoD's page says: "Personnel being discharged or released from active service as involuntary separatees under honorable conditions may receive up to 30 days of leave, or transition PTDY up to 10 days, as required, to facilitate relocation." The page names involuntary separatees. This page could not confirm from DoD Instruction 1327.06 whether other members, such as retirees or those leaving at ETS, qualify, so ask your command.

Traps to avoid

• Assuming the 60-day sellback resets. It is once over your career.
• Debts on your pay account. DFAS says a debt of any amount can delay your final pay by 120 days or more.
• Assuming you qualify for PTDY. DoD's page names involuntary separatees under honorable conditions. This page did not read DoD Instruction 1327.06 itself (the DoD site blocked the download), so ask your command which orders apply to you.

Where to call and where to go

Phone

• Phone numbers differ by installation. Ask your installation finance or Army Military Pay Office. No national number for this topic is printed on the DFAS or DoD pages I read.
• Veterans Crisis Line, 24/7: 988, then select 1. Source: Helpful VA phone numbers

Official pages

• DoD Military Pay: Leave benefits during transition
• DFAS: Final pay and debt
• DFAS: leave carryover and special leave accrual
• 5 U.S.C. 5534a, terminal leave employment
• 37 U.S.C. 501, payment for unused leave
• Army Regulation 600-8-10, Leaves and Passes
• Army installation ethics briefing on post-service employment