Terminal Leave Calculator: Should You Use It or Sell It?

When you're preparing to separate from the military, one of the most important financial decisions you'll make is what to do with your terminal leave. Should you take it and extend your benefits, or sell it back for a lump sum payment?

The Two Options

Option A: Take Terminal Leave

When you take terminal leave, you remain on active duty until your terminal leave expires. This means you continue receiving:

• Full base pay for the duration of your leave
• BAH (Basic Allowance for Housing) if you're receiving it
• TRICARE health coverage for you and your family
• Access to base facilities and services

Plus, you get the flexibility to start your civilian job when you're ready, relocate without rushing, and decompress from military life.

Option B: Sell It Back

Selling your terminal leave means you receive a lump sum payment equal to your base pay for those days. However:

• The payment is subject to federal income tax (often at a higher rate since it's a lump sum)
• You lose TRICARE coverage immediately upon separation
• You must start civilian employment right away or find alternative insurance
• You have less time for relocation and transition planning

Use Our Free Calculator

We've built a Terminal Leave Calculator to help you compare both options based on your specific situation. Just enter your:

• Number of terminal leave days
• Current rank and base pay
• BAH amount (if applicable)
• Whether you have a civilian job lined up

The calculator will show you the real dollar value of each option and provide a personalized recommendation.

When to Take Terminal Leave

Taking terminal leave usually makes more sense if:

• You have a family that needs continued TRICARE coverage
• Your civilian job has a flexible start date
• You need time to relocate across the country
• You want a mental health break between military and civilian life
• The healthcare costs for your family would exceed the cash value

When to Sell It Back

Selling your leave might be better if:

• You're single or have insurance through a spouse
• Your civilian job starts immediately and you need to be there
• You need cash now more than extended benefits
• You're ready to start earning civilian salary right away
• Healthcare costs aren't a major concern

The Healthcare Factor

For many separating service members, especially those with families, the extended TRICARE coverage is the most valuable benefit of taking terminal leave. Consider:

• Family health insurance on the civilian market: $800-1,500/month
• Prescriptions, ongoing treatments, or pregnancy: Could save thousands
• Deductibles and co-pays: Usually lower or non-existent with TRICARE

If you're selling back 60 days of leave, that's 2 months of free healthcare you're giving up. For a family of four, that could be worth $2,000-3,000 in saved premiums alone.

Tax Considerations

One often-overlooked factor: when you sell terminal leave, the entire lump sum counts as income in that tax year. This could:

• Push you into a higher tax bracket
• Reduce your tax refund the following year
• Result in 25-30% of the payment going to taxes

Taking terminal leave spreads that income over 2 months, which may result in lower overall tax liability.

Make an Informed Decision

The right choice depends on your specific circumstances. Use our Terminal Leave Calculator to see the real numbers for your situation, and consider factors like:

• Healthcare needs
• Relocation timeline
• Job start date flexibility
• Financial cushion
• Mental health and decompression time

Remember: this is one of your last benefits from military service. Make sure you're getting the most value from it.

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Ready to calculate your best option? Try our free Terminal Leave Calculator now - no account required.

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Sources: VA.gov, Military OneSource, Benefits.gov