When considering separation programs that offer voluntary separation pay, Airmen should also consider the impact federal and state tax deductions has on the calculation. These tax deductions will reduce the actual amount you receive and could also have significant tax implications when filing 2014 taxes.
The fiscal 2014 VSP program entitles enlisted retention board-eligible Airmen 1.25 the rate of full separation pay. Those Airmen nonselected for retention by a board will be entitled to full separation pay at the standard rate. The formula for calculating full separation pay is as follows: monthly base pay multiplied by 12, then multiplied by the years of total federal military service and all whole months served over the total years, then multiplied by 10 percent. This calculation is applicable to Airmen nonselected for retention by a board. If the Airman elects to separate in lieu of meeting a board, then multiply the total amount achieved in the formula by 1.25.
Airmen should then consider any deductions from the estimated VSP amount. Tax deductions could reach up to 35 percent when considering all federal and state tax laws.
For additional counseling assistance, the 56th Comptroller Squadron encourages Airmen considering VSP to contact the finance customer service office, Airmen and Family Readiness Center and/or a tax specialist.
Coyote quote: “A person doesn’t know how much they have to be thankful for until they have to pay taxes on it.