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Is it Better to Sell Back Leave or Take Terminal Leave?

by Ryan Guina

A popular topic among retiring and separating military members is whether or not it is better to take terminal leave or sell it. I have heard a lot of heated debates about which is better, and I have even heard people raise their voices about this topic.

Most people feel selling back leave is a black or white issue, but it’s not. It is a very important and emotional financial issue to consider. Separating or retiring can be a stressful time, so it is well worth your time to plan ahead! I hope this information helps make a few people’s decisions easier. :)

The argument for taking terminal leave: Most of the people that argue in favor of taking terminal leave stress that you get the full benefits while you are on terminal leave (BAH, BAS, incentive pay, health care, etc.). Their main argument is that you are shorting yourself by not getting the full monetary benefits when you sell leave.

Another popular argument for taking terminal leave is that this is time off you have earned and have not taken because operations tempos were too high, you didn’t have time to take leave, or you chose to save your leave.

The argument for selling leave: The decision to sell leave usually stems from either wanting more money, or not being able to take all of the terminal leave. My wife will separate from the USAF this fall (she is not retiring) and has been told by her supervision she will only be able to take 2 weeks terminal leave. The rest of the leave she will have to sell. This is common for critically manned fields, especially for those who are not retiring.

My brother, who is a Marine, told me their old Top would allow Marines who were separating after completing their first enlistment to take only 5 days of terminal leave no matter what. I guess a lot depends on the unit.

Another reason for selling leave is to get extra money. If you have no immediate plans for employment following separation, or if you absolutely need the money, you can choose to work until your separation date and sell the remaining leave. In effect you will be getting more money than had you taken terminal leave because you would have received full pay and benefits until your separation date; the sold leave is compensation for time off you never took.

Pros to selling leave:

  • Extra money (great for transitions when changing careers, paying bills, resolving debt, etc.)

Cons to selling leave:

  • You do not get benefits such as BAH, BAS, medical benefits, or incentives such as special duty pay for the time off that you earned.
  • You do not get to take the time off that you earned.

Other factors to consider: Leave that you sell back is automatically taxed at 25%. It is easy to figure out how much you will receive: Multiply your base pay by .75; this is how much you will receive per month of leave sold. It is prorated if you sell back a portion of a month.

You can mix and match. You can elect to take as much terminal leave as your unit will allow and sell back the rest (up to 60 days).

The choice is (mostly) yours. No one can force you to take terminal leave. They can, however, require you to work until a certain date and force you to sell some or all of your leave.

What did I do when I separated? I sold all of my leave, over 50 days. Why? There were several reasons. When I was at my last duty station my family and high school friends only lived a 6-7 hour drive away. I deployed several times while I was in the AF and we got a week or more in comp time when we returned from our deployments. I used my comp time and long weekends to visit my family and friends. During my last 2 years on Active Duty, I rarely had to take leave.

When I transitioned out of the AF I did not have a job lined up immediately. Selling leave allowed me to take a month off before beginning a serious job search. I visited my brother halfway across the nation, stayed with my parents for a couple weeks, then took the scenic route and visited with some friends when I moved to the Midwest.

Selling my leave gave me the freedom to take some time off without having to worry about paying for my car, cell phone, or any other bills while I was between careers.

Conclusion: Selling back leave should be taken on a case by case basis. Some people should sell it all, some people should take terminal leave, and for others, a combination works best.

Take your time when making the decision, and good luck in your post-military career! :)


Published or updated August 14, 2008.
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{ 20 comments… read them below or add one }

1 Antwan

Thanks, it helped a bit. I’m taking it!

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2 Cory

I sold my leave because they canceled my mandatory taps class and the next one was only a week away from my seperation date. Go figure?

Anyhow, it has been 15 days and I have yet to get paid, how long does it take?

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3 Joey

Cory, I’m in the same boat. My DOS was 5 Dec 09. I was selling back 57 days of leave and still have yet to receive my final pay. My friend separated the same time and got his final pay a week later. Really wish I knew the answer to your question too.

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4 rolo

there’s a policy that says if you are involuntary separating you are entitled to an administrative absence of 30 days. !that’s free leave! so, if you taking terminal leave you should think it twice and sell back at least those 30 days!!
DoDI 1327.06

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5 Ryan

Thanks for the info, rolo.

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6 Dave

Ryan,
You made a statement that “Leave that you sell back is automatically taxed at 25%.” This is incorrect. Taxes on large lump sums (like folks selling back leave) are indeed withheld at a higher rater than most individuals pay, however unless someone is in a 25% or higher tax bracket (and very few military members are) you’re going to get a good chunk of those withheld taxes back when you file your return.
I’m a 22 year single MSgt with a mortgage. I’m in a 15% tax bracket because my TAXABLE income (after deductions) is less than $34,000 a year. Since base pay is usually the only military income that’s taxed (not including bonuses and income from selling back leave), a quick look at the mlitary pay charts shows that most individuals will easily fall into the same tax bracket I’m in.
Yes, taxes will be withheld from the money you get selling leave, but as far as how much it’s taxed, it will be the same as the rest of your pay and NOT a flat 25%.

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7 Ryan

Thanks for the info, Dave. I wrote this article some time after I separated from the military, so perhaps I didn’t remember the exact amount correctly. Based on my recollection, I thought the amount was around 25%, most of which I received back when I filed my tax refund the following year – I don’t remember my exact tax bracket that year because I had several months of military income, several months of unemployment, and several months income from a civilian job.

The key point to remember is that you pay pay more taxes up front than you are expecting, but you will potentially receive a refund when you file your taxes the following year. Thanks for pointing that out, Dave, and thanks for your service!

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8 David Cerino

So when do you get your pay back? Better yet, how?
I sold roughly 58 days and its been about a month. My friend left the military a year before me and received a check on the mail 15 days later. Do we recieve a check, or direct deposit? I just moved and have new address. Hope someone can help me with some information.

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9 Ryan

David, I received my payment via direct deposit. My recommendation is to contact your former finance office and see if they can point you in the right direction.

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10 Dave

I retired from the Air Force 1 Feb 2011. My final paycheck, for the last half of January, was delayed a little over a week and I received that via direct deposit (just as my other paychecks had always been). That final paycheck included the money for all the leave sold back. That’s one of the reasons they delay your final paycheck, from what I was told. David, normally in your separation paperwork there are forms that ask where your final paycheck will go (if I remember right). If you specified a Direct Deposit account, I would think that’s where it should have gone, but if you haven’t received it and it has been over a month, I agree with Ryan that you should immediately contact your nearest Finance office.

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11 Daniel

I am a single marine, I will be seperating from the military later this year. I have a question about terminal leave, as a marine who does not rate BAH and does not have comrats. (We have a meal card) and lives in the barracks, do we recieve BAH and comrats while on terminal? Or de we just make the same amount of money we make while we are on active duty?

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12 Ryan

Hi Daniel, it’s been several years since I separated from the military, but I believe I received my standard paycheck when I was on terminal leave. At the time I was living off base, so I am pretty sure I received BAH and BAS. It’s very possible the military will continue to pay you as if you were living on base, but I’m not 100% certain. My recommendation is to contact your unit finance office and ask them to verify how your terminal leave will be determined.

Thanks for your service.

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13 Leonard

Hey Daniel,

You will receive BAH and comrats when on terminal. Since the military will no longer be providing you with housing and a meal card and you are still under contract, they are legally binded to providing you with the extra means of payment.

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14 Daniel

Thanks for the advice that’s exactly what I did. And that’s exactly what happened. So if you live in the barracks take as much terminal as you possibly can.

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15 Thad

Official retirement date is 1Apr2012. I’m going to take some terminal leave before that date and sell some leave back. Will I receive the money for selling leave before my retirement date or after?

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16 Ryan

Thad, you will typically receive the money from terminal leave after your retire, usually within about 2 weeks. Also keep in mind that your retirement pay doesn’t start until the month after you retire. So it’s a good idea to have a couple months of living expenses lined up while you adjust to your new income (and just in case there are any unexpected surprises). Thanks for your service!

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17 Todd

I’m retiring 1 July 2012 and I’ll have roughly 56 days of leave between now and then to either use, use & sell part, or sell all of it. You mention that the cons when you sell leave are that you do not get benefits such as BAH, BAS, medical benefits, or incentives such as special duty pay. Not sure I’m following that logic since sold leave is based on base pay and not your BAH, BAS, Medical Benefits, or special duty pay? Ex: If I choose to sell 26 of my 56 days of leave remaining and just use 30 for terminal leave – I don’t lose my BAH, BAS, etc. during those 26 days I sold, I just forced to continue working while I’m waiting for my terminal leave to kick in and not take leave. I am also amazed at the taxable rate of 25%, what is your source for that statistic, just curious? Thanks for the informative article and I look forward to your reply.

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18 Ryan

Todd, the 25% tax rate was what the government charged me when I sold leave about 6 years ago. The rate was automatic at the time, but it may have changed. I recommend contacting your finance department to verify this.

Regarding the BAH, BAS, medical, and other benefits: Yes, you are correct, the payment for selling leave is only computed from base pay. So the choice really comes down to whether or not you want to work up to, or close to, your scheduled termination date.

There are some people who view selling leave as missing out on benefits since they could earn their full pay and benefits without having to work, while other people don’t mind working up to, or close to, their termination date, and then selling the leave so they can have an extra chunk of money when they separate. It really comes down to personal preference as to which is better.

Best of luck with your transition, and thanks for yours service!

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19 Arch

By Oct 1st, 2012 I will have 9489 points. What happens if I submit my retirment for Oct 1st? Will I be shorting myself 26 years of service? I really don’t want to stick around for another 30 days reach Nov 1, since retirements occur on the 1st of the month.

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20 Derek

Barracks-Take Terminal.
Married-Sell your Leave.

Here’s why:
Barracks Marines/Sailors/Soldiers etc. Get out 30 days early and get EXTRA money for the BAH and BAS that the military pays since you won’t be living/eating there.

If you continue to work, your staying in for no reason because you get no benefits but yes you still get EXTRA money from selling your leave balance instead. If BAH+BAS comes out to about $1800/mo in Cali (What my peers get with dependents, I’m a Bricks ***** myself) and your sold leave is about $1650 ($2200 base pay x.75/mo) you should definitely take terminal. The actual amount of extra terminal pay would be less than $1800 since you have no dependents as a barracks member but I have no reference as to how much that is. lets say $500. So $1300 extra plus 30 day vacation against an extra $350??? F yeah I’m out.

As a married individual however, those benefits would NOT be extra to you since you’re already receiving them! You got a family anyway, stay working make the wife happy, keep the pay you have been getting and get the only extra money you can by selling your leave back. You already have a home anyway so you got somewhere to go. Barracks Marines or etc. would have to go back home or find somewhere to go. That extra money during that month of terminal with no work obligation will help out for sure.

Now, if anybody can elaborate on what the actual math is for single Marines…etc. taking leave and how much bah and bas they will receive can change the value of taking teminal vice selling leave to the single Marine..or etc.

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