Final Pay Calculator

When a service member separates or retires from active duty, the final paycheck is a composite of prorated basic pay, BAH, BAS, and any special/incentive pays through the separation date. In addition, qualifying members may receive lump-sum payments that fall under separate statutes: Separation Pay (10 U.S.C. § 1174), Special Separation Benefit / Voluntary Separation Pay (10 U.S.C. § 1174a / § 1175a), Disability Severance Pay (10 U.S.C. § 1212), and any sold-back leave under 37 U.S.C. § 501.

All separation-pay categories are administered under the DoD Financial Management Regulation (FMR), Volume 7A, Chapter 35 ("Separation Payments") — accrued leave pay in section 2.0, non-disability separation pay in 3.0, readjustment and severance pay other than disability in 4.0, and disability severance pay in 5.0. TSP is governed separately by Volume 7A, Chapter 51 ("Savings Programs and Flexible Spending Accounts").

Most separation and severance payments are taxable wages subject to federal income-tax withholding (at the flat supplemental rate) and state tax where applicable — but not FICA: DoD FMR Vol. 7A, Chapter 45, paragraph 2.2 lists the wages subject to FICA withholding (basic pay and inactive-duty compensation), and separation payments are not among them. Federal withholding is applied per IRS Publication 15-T.

Disability Severance Pay under 10 U.S.C. § 1212 is not subject to tax withholding or reporting in either of two cases: the entitlement resulted from a combat-related injury or illness (armed conflict, extra-hazardous service, conditions simulating war, or an instrumentality of war), or the member is entitled to VA disability compensation — or has a proposed VA rating through IDES — at separation. If tax was already withheld and the VA award arrives later, DFAS refunds it when the award lands in the same tax year, and the IRS refunds it when the award lands in a later year. DoD FMR Vol. 7A, Ch. 35, paras. 5.4.1 through 5.4.5; IRS Publication 3.

Recoupment works two different ways. If you later receive VA disability compensation, VA withholds it until it recovers the gross taxable amount of your separation or severance pay LESS the federal income tax withheld at the flat supplemental rate — not the full gross (for payments made after September 30, 1996). If you instead later qualify for military retired or retainer pay, DFAS recoups the FULL gross taxable amount from that retired pay. Combat-zone and SecDef-designated combat-related-operations disability severance is not deducted from VA compensation at all. DoD FMR Vol. 7A, Ch. 35, paras. 3.5.1, 3.5.2, and 5.6.

Under 37 U.S.C. § 501 and DoD FMR Vol. 7A, Chapter 35, a separating or retiring member may sell back accrued leave at the member's current basic-pay daily rate, subject to a 60-day career-lifetime limit. Sold-back days do not carry BAH or BAS. Terminal leave is an alternative that keeps the member on active-duty pay (including BAH and BAS) through the separation date.

TSP contributions stop with the member's last pay period. Distribution options (keep the account in TSP, roll to an IRA or new employer plan, or take a cash withdrawal) are governed by 5 U.S.C. Chapter 84 and the Internal Revenue Code. Early distributions before age 59½ may be subject to the 10% additional tax under IRC § 72(t), with limited exceptions for public-safety officers and members separating in or after the year they turn 55.