Leave Planner

Active-duty members accrue leave at 2.5 days per month of service under 10 U.S.C. § 701, or 30 days per year. At separation or retirement, the accrued balance can be taken as terminal leave, sold back as a lump-sum payment under 37 U.S.C. § 501, or split between the two. Each path produces a different number on the final paycheck and a different tax outcome. The decision is rarely about "which is more money" — both pay the same basic-pay amount per day of leave, but only terminal leave keeps BAH, BAS, and other allowances flowing. It is about timing, BAH, BAS, TRICARE coverage, and what the member needs the time for.

Terminal leave: the everything-still-on path. Terminal leave is ordinary chargeable leave taken immediately before the official Date of Separation (DOS). The member remains in an active-duty pay status through the leave period — basic pay continues at full monthly rate, BAH continues at the duty-station rate, BAS continues at the current monthly rate, TRICARE coverage continues for the member and dependents, and the member can still use the commissary, exchange, and base services. The trade-off is that terminal leave burns accrued leave days at one-day-per-calendar-day. A member with 45 days of accrued leave who takes 45 days of terminal leave ends with a zero balance and zero sell-back payment.

Sell-back: the lump-sum path. Selling back leave converts accrued leave days into a one-time payment at the member's current basic-pay daily rate (monthly basic pay ÷ 30). The career-lifetime cap is 60 days under 37 U.S.C. § 501(b)(1); days sold back in earlier separations count against the 60. Sold-back days do not carry BAH or BAS — only basic pay. That single rule is easy to miss when estimating the final LES. An E-6 over 14 with 45 days of leave who sells back the full balance receives roughly 45 × (monthly basic pay ÷ 30) — and zero BAH or BAS on those days, even though terminal leave would have paid all three. To see the sell-back payment next to everything else in the last paycheck — prorated BAH and BAS, the clothing allowance settlement, separation pay, and the tax reconciliation — run the final pay calculator.

Your separation date — not the sell-back election — is what moves the allowance money. BAH and BAS are paid through your Date of Separation and stop there, prorated day-for-day on the 30-day military month (DoD FMR Vol 7A, Ch 1, ¶3.2). Selling leave back does not change your DOS, so with the same DOS the total BAH and BAS you receive is identical whether you sell your days or burn them as terminal leave — the sell-back election only changes whether those leave days pay basic pay as a lump sum or buy you days at home while full pay keeps running. Where the calendar genuinely moves money is the DOS itself: every additional day you remain on active duty carries a day of BAH and BAS with it. At a $2,400/month with-dependents rate, that is $80/day in BAH plus $15.90/day in enlisted BAS. So when you have any influence over the date on your orders, a DOS set late enough to take your leave as terminal leave — rather than separating earlier and selling the days back — is worth roughly $96/day in allowances on top of the identical basic pay, before counting TRICARE and base privileges that also run through DOS.

Tax treatment differences. Both terminal leave and sold-back leave are taxable as ordinary income on the year-of-payment W-2 (DoD FMR Vol 7A, Ch 35, ¶2.3). Two practical differences shift the after-tax math. First, sold-back leave is typically issued as a single lump-sum payment that DFAS withholds federal income tax on at the flat 22% supplemental wage rate (IRS Publication 15), which can be higher than the member's actual marginal rate — the difference comes back as a refund the following April but is unavailable in the months between separation and refund. Terminal leave is withheld at the regular wage rate using the W-4 the member has on file. Second, FICA treats the two paths differently. Terminal leave is ordinary basic pay while on leave, so Social Security and Medicare are withheld as usual (DoD FMR Vol 7A, Ch 45, ¶2.2.1). A lump-sum leave sell-back is not on Chapter 45's list of FICA-taxable wages — it is subject to federal income tax withholding only, at the flat 22% supplemental rate; no Social Security or Medicare is deducted from it. So each terminal-leave day carries the normal 6.2% + 1.45% FICA alongside regular withholding, while the sell-back check's only federal deduction is the 22%.

SkillBridge and Permissive TDY (PTDY) reduce the trade-off. SkillBridge is non-chargeable — the member is in industry training but still on active duty, BAH and BAS continue, no leave days burn. Permissive TDY for house-hunting before a PCS is similarly non-chargeable for up to 10 days (CONUS) or 20 days (OCONUS) under service-specific authorizations (DAFI 36-3003, Table 4.5, for the Air and Space Force). Combining SkillBridge with terminal leave stretches the paid runway: the SkillBridge weeks are nonchargeable, so BAH and BAS continue while the leave balance stays intact — and the member can then burn that balance as terminal leave at the end, keep days for sell-back, or split the two.

Terminal leave runs right up to your separation date. Accrued leave taken at the end of service (terminal leave) may be scheduled up to — but not past — the Date of Separation; there is no minimum on-duty period required in the days before DOS. Any balance not used by the separation date is either sold back (up to the 60-day career cap) or forfeited. SkillBridge and PTDY are non-chargeable alternatives that preserve both BAH continuity and the accrued-leave balance for sell-back.

Use-or-lose at fiscal year-end. Leave balances above 60 days on 30 September are forfeited under 10 U.S.C. § 701(b) and DoD FMR Vol 7A, Ch 35, ¶2.2.2.1. The fiscal-year-end forfeiture is a meaningful planning factor for members not yet at separation: a balance over 60 days entering July or August signals that scheduled leave or sell-back planning needs attention before September 30. Qualifying deployments may authorize special leave accrual (SLA), which raises the carryover ceiling to 90 days total (60 ordinary + 30 SLA) under 10 U.S.C. § 701(e) and DoD FMR Vol 7A, Ch 35, ¶2.2.2.2. SLA leave is not lost at the next 30 September — it is retained until the end of the second fiscal year following the fiscal year in which the qualifying service ends. The former 120-day SLA ceiling was eliminated in 2023; for the transition from the 120-day cap to the 90-day cap, DoD FMR Vol 7A, Ch 35, ¶2.2.2.5 defers to the Office of the Assistant Secretary of Defense (Manpower and Reserve Affairs) memorandum of September 5, 2023.

Authorities: 10 U.S.C. § 701 (Entitlement and accumulation of leave); 37 U.S.C. § 501 (Payment for unused leave); 10 U.S.C. § 1143(e) (SkillBridge); DoD Financial Management Regulation Volume 7A, Chapter 35; AFI 36-2671 (Air Force SkillBridge Program); DAFI 36-3003 (Military Leave Program — PTDY/terminal leave); IRS Publication 15 (Employer Tax Guide — supplemental wage withholding rules). For binding answers on your individual separation timing, contact your installation finance office before submitting the DD Form 31 leave request.