Aviation Continuation Pay (ACP - The Bonus)

[Guest JArcher00]

A Major I know told me it was a bad deal because it ends up coming out of your retirement in some way int the end. Any thoughts???

[Guest Metalhead]

What he was probably talking about is -- if you take the bonus for 5 years, you aren't getting out. When you do get out and fly for the airlines you work for them 5 less years. The amount of money you make from taking the bonus / getting an AF retirement is most likely not as much as it would be if you went to the airlines and built 5 more years of seniority and retired.

make sense?

[Toro]

For those with a little time under their belts, does the Aviator Continuation Pay (Bonus) time include all your flying time, or only rated time?

The verbage on the AFPC ACP website is that "Pilots with a minimum 9 Years of Pilot Aviation Service" are eligible for the bonus. I'm trying to figure out if they consider Aviation Service as the point when pilot training started (and I start receiving flight pay) or if it's 9 years of rated service -- from my UPT date.

I've called finance, MPF, talked to my orderly room and gotten the run around AFPC - nobody seems to have a straight answer. Anybody here who has received the bonus have an answer?

[ClearedHot]

Toro,

I am not sure how the regulation reads, but my bonus was based on my UPT grad date (expiration of ADSC), not my gate months. The guys in the bonus shop used to be sharp, they could pull your records up and tell you right there.

https://www.afpc.randolph.af.mil/acp/F1HQAFPC2F.htm

Check out Part III, Section D.

[Guest pavesooner]

Ok,

Lets say your UPT commitment expires 6 Nov 05....

How soon can you sign for the bonus....

The AFI on E-publishing says 90 days before hand...but that pub seems outdated or at least it hasnt been revised to reflect the current bonus change we underwent last year?

Any insight?

[Toro]

Look here for all your answers on the Aviation Continuation Pay (ACP...bonus). My commitment ended in June of this year, so I signed for the bonus. Around January or so, I went to the ACP website and started checking things out. I completed the application and sent it in - it was actually very easy and I got updates e-mailed to my .mil account every so often. The info on the ACP site is only good through the end of the fiscal year.

[Guest C-130]

I am hoping somone may be able to shed some light on this topic or at least steer me to a regulation.

If you receive your Aviation Continuation Pay (ACP) while serving in a tax free zone is the entire amount tax free or a portion?

I have looked at the IRS Pub 3 and various Air Force regs, but with no luck. I am getting different answers from Finance, dependig on who I talk to. Thanks for the help.

[sputnik]

I am hoping somone may be able to shed some light on this topic or at least steer me to a regulation.

If you receive your Aviation Continuation Pay (ACP) while serving in a tax free zone is the entire amount tax free or a portion?

I have looked at the IRS Pub 3 and various Air Force regs, but with no luck. I am getting different answers from Finance, dependig on who I talk to. Thanks for the help.

As an officer your monthly tax free income limit is limited to the max enlisted pay rate. If you're a Maj on flight pay, you're about at that limit. Anything you make over the limit (for example an O6 makes more--or you if you get the bonus that month) you pay normal tax rate on.

I've been tax free for 2-3 of the years I've recieved the bonus...that's the way it works.

Don't get wrapped up in the bonus part, look at the max amount an officer can get tax free. At the end of the day your bonus is just like any other pay, and subject to the same limit as any other pay (basic, flight, etc). IRS really has nothing to do with it, it's DoD limits.

Where's FinanceGuy?

[Herk Driver]

I am hoping somone may be able to shed some light on this topic or at least steer me to a regulation.

If you receive your Aviation Continuation Pay (ACP) while serving in a tax free zone is the entire amount tax free or a portion?

I have looked at the IRS Pub 3 and various Air Force regs, but with no luck. I am getting different answers from Finance, dependig on who I talk to. Thanks for the help.

Sputnik is spot on. I don't know where these guys get their info from but seems a little high to me (see below). But, serve enough months in the desert and you will end up getting all of your income taxes back for the year anyway.

From the AFPC website.

Aviator Continuation Pay (ACP) Bonus Tax Free While Currently Serving In A Combat Zone

Answer:

Depending on the situation.

Internal Revenue Service (IRS) Publication 3 allows commissioned officers to exclude certain pay (i.e., active duty pay, imminent danger (IDP)/hostile fire pay (HFP), etc.) from their income. However, the amount of exclusion is limited to the highest rate of enlisted pay (in same hostile area), in addition to IDP/HFP, for each month during any part of which you serve in a combat zone.

According to the Defense Finance and Accounting Service (DFAS) ACP representative, aviators who currently receive their initial ACP installment while in a combat zone receive approximately $6,700 of it tax free.

Members not in the combat zone have their initial or subsequent installments paid with the 25% FITW deduction and possibly SITW (State Income Tax Withheld) deduction.

[Guest]

can some of the "experienced" dudes explain the bonus process to us young guys? i realize i'm probably not in a position to be getting one, but this is one of the many "pilot things" they don't teach at UPT. thanks.

[sputnik]

can some of the "experienced" dudes explain the bonus process to us young guys? i realize i'm probably not in a position to be getting one, but this is one of the many "pilot things" they don't teach at UPT. thanks.

Well as you can probably tell from what's written above, the bonus can change every year.

Intent is to keep you in once your UPT commitment expires. Last several years there has only been one option, five years at $25k/year. You can only take it once (when it expires you stay in or get out, but no more bonus for you). Goes by fiscal year, can take a long time before they work out the details. Last year I think it was Jan before they offered something.

In my brief career I've seen 1, 2, 3, 5, 20 and 25 year bonus options (last two options were to your 20 or 25th year of aviation service), plus you could sign a new one when existing one expired.

I hadn't heard the $40k rumor, but good luck to everyone. I thought the max amount was set by congress (currently 25k) whereas individual services could determine what they wanted to actually give. Was the limit raised or would this pending legislation change that?

I did notice the boards are coming fast and furious. Didn't bother checking O-6, sorry CH, but I did see the O-5's are quick

[MD]

Dunno. Wondered that myself as I chase down possible full-time Guard/Reserve options. The FY08 Reserve ACP eligibility was worded "10 years of aviation service (YAS) in FY08," which if I'm correct, begins Day 1 of UPT instead of graduation day. So, if I started UPT in Mar 99, I wouldn't have 10 YAS until FY09 (March 09 to be exact). The dudes who started UPT in Oct-Dec 99 get horked due to fiscal year timing. They will fall under FY10. Anyone disagree with my public school math?

IIRC, the reason last year's Active-Duty ACP program announcement was so late was because the annual NDAA bounced back and forth between the President and Congress until Dec/Jan. Hopefully this year's announcement will be sooner. Show me the money, Big Blue!

2 questions:

1. Yes, our Guard guys were told that they had to have 10 years of aviation service, event though they only had an 8 year UPT ADSC, which makes no sense. Where is this written that its supposed to be this way, and why the difference? Is it because they assume that everyone now is under an 10 yr ADSC?

2. Do the years of aviation service truly start from Day 1 of UPT, or is it the month of graduation.......our local CBPO seems to be going by the latter.

[Guest Cap-10]

You can reference AFI 36-3004 (found at e-publishing.af.mil) for me info.

With regards to flight pay, stars and toilet bowls, gate months (officially called Operational Flying Duty Accumulator (OFDA)), check out AFI 11-402):

3.5. Qualification for Flying Incentive Pays.

3.5.1. Qualification for Aviation Career Incentive Pay (ACIP). To be entitled to ACIP, an officer must: 1) be entitled to basic pay; 2) hold a current aeronautical rating or be enrolled in training leading to an aeronautical rating; 3) be medically and professionally qualified for aviation service; and 4) have a valid AO. In addition to these four requirements, rated officers in conditional flight pay entitlement status must be assigned to an active flying position and satisfy conditional incentive pay requirements IAW DoD FMR, Volume 7A, and AFI 11-421.

Flight Pay starts on day one of flight training.

2.6. Total Rated Service, Flying Time, and OFDA for Advanced Ratings.

This section pertains to eligibility criteria in Table 2.1.

2.6.1. Total Rated Service. Compute years of rated service from the date the officer received the basic USAF rating. Do not include breaks in military service or any time the officer was suspended (except ASC 02), disqualified, resigned, separated, or was relieved of his or her commission. Exception: Prior to 1 August 2002, breaks in service did count towards rated service providing the member was not relieved of his or her commission and was not disqualified from aviation service.

2.6.2. Flying Time and OFDA. Military flying time logged (including UFT student time) and OFDA months (including OFDA months accumulated in training for the specialty before award of the USAF basic rating) are creditable toward award of an advanced rating in that specialty.

Years of rated service starts when you get your wings. Gate months for advanced ratings include training months

AFI11-402 25 SEPTEMBER 2007

Table 2.1. Mandatory Requirements for Award of Aeronautical Ratings.

There are a bunch of different combinations with some and/or stipulations, but the base line is:

Senior Pilot: 7 years and 2,000 Hours

Command Pilot: 15 years and 3,000 Hours.

Cap-10

[B*D*A]

Just curious, are these bonuses considered part of basic pay and therefore taxed, or do you get a break?

[MD]

Just curious, are these bonuses considered part of basic pay and therefore taxed, or do you get a break?

They're taxed. For example, the 1 year/ $15K bonus will net you about $12.5k.

[Hacker]

They're taxed. For example, the 1 year/ $15K bonus will net you about $12.5k.

The $25K bonus is also pre-taxed. Comes out to about $18,500 delivered to your account.

[sirjrod00]

For active duty Airmen, the program gives various rated aviators -- namely some pilots, combat systems officers and air battle managers -- the opportunity to sign an active duty service commitment contract agreement in exchange for a financial bonus.

For active duty rated aviators who will finish their initial flying training commitment in this fiscal year, the bonuses are:

-- Pilots: five-year ACP agreement at $25,000 a year

-- Air battle managers: five year ACP agreement at $15,000 a year

In addition, retirement-eligible active duty pilots, combat systems officers and air battle managers can opt for a three-, four- or five-year ACP agreement and earn $15,000 a year

So are navs going to be eligible once again? It only gives amounts for pilots and ABMs, but then it lists combat systems officers...

[Toro]

Internal Revenue Service (IRS) Publication 3 allows commissioned officers to exclude certain pay (i.e., active duty pay, imminent danger (IDP)/hostile fire pay (HFP), etc.) from their income. However, the amount of exclusion is limited to the highest rate of enlisted pay (in same hostile area), in addition to IDP/HFP, for each month during any part of which you serve in a combat zone.

According to the Defense Finance and Accounting Service (DFAS) ACP representative, aviators who currently receive their initial ACP installment while in a combat zone receive approximately $6,700 of it tax free.

Okay, I just did some research on this as it may apply to me and I want to make sure my caveman brain got this right....

The DFAS 2009 Military Pay Table has a note that says, "For the Master Chief Petty Officer of the Navy, Chief Master Sergeant of the AF, Sergeant Major of the Army or Marine Corps or Senior Enlisted Advisor of the JCS, basic pay is $7,143.30. Combat Zone Tax Exclusion for O-1 and above is based on this basic pay rate plus Hostile Fire Pay/Imminent Danger Pay which is $225.00."

So the max amount I can receive tax free is $7143.30+225=$7368.30 a month.

Let's say - for the sake of making the math easy - I currently pay $368.30 in Federal taxes a month. With that excluded, I am eligible to receive an additional $7000 tax free (which jives with the figure Herk Driver posted).

If I were to receive a bonus of $25,000 during a month when I was deployed, I would receive $7000 tax free, then I would be taxed on the remaining $18,000. Assuming getting a take-away of about 75% after taxes, I would take 13,500 from my taxable 18K. This, plus the $7000 I received tax free give me a net take-away of $20,500 from my bonus.

As Hacker mentioned, you normally (without tax-free) take away about $18,500 from the bonus.

So - based off these figures - you take away about an extra two grand from being deployed when you get the bonus? Math in public, brain hurts...but does this look right?

[Jughead]

Let's say - for the sake of making the math easy - I currently pay $368.30 in Federal taxes a month. With that excluded, I am eligible to receive an additional $7000 tax free

Why are you "excluding" your withholding amount? What's excluded is your income (up to the ~$7,400 limit). Remember, your monthly withholding is not the tax you're paying, it's an estimated installment on your overall tax liability for the year.

So - based off these figures - you take away about an extra two grand from being deployed when you get the bonus? Math in public, brain hurts...but does this look right?

No, because you're ignoring your base + fly + hfp = taxable income that is already subject to the exclusion. Depends on your rank & years for flight pay purposes, but if your normal total taxable income for the month is over the limit, receiving the bonus in the CZTE makes no difference for your tax exclusion; if your normal taxable income is below the limit, the first $X of the bonus to bring it up to the limit is an additional tax exempt amount.

A better way to look at this is what tax bracket you're in. If you're going to be in the desert a lot, you'll probably drop down the 15% (or lower?)--multiple CZTE months make this a bit tough to estimate. Anyway, go w/ 15% for argument. Figure out what "X" is (how much your normal total taxable income is below the limit), multiply that by 15% (the tax you "would have" paid on X if not in CZTE), that's your tax advantage. Bottom line, not going to be a large amount, certainly not $2K.j

PS: Sputnik pretty much answered this earlier in the thread: https://www.flyingsquadron.com/forums/index...st&p=162499

Edited February 26, 2009 by Jughead

[Finance_Guy]

So - based off these figures - you take away about an extra two grand from being deployed when you get the bonus? Math in public, brain hurts...but does this look right?

You haven't mentioned anything about TSP. Do you plan to put any percentage of your bonus into TSP? The tax-free cap is calculated separate from your regular pay exemption. It is possible you could obtain more tax exempt when putting bonuses into TSP.

[Butters]

OK, I have received CZTE when I was paid my bonus 3 times.

You can only have $7368.30 Tax exempted every month.

Meaning if you are a Major with 12yrs service + Flt Pay+HFP you get 6,325.50+650+250 = 7225.50

So, 7368.30-7225.50 = 142.80

So, 24857.2 is taxed at the max rate ~35% can't remember off the top of my head and 142.8 is tax free.

I have seen this on my LES several times. The trick is get lots of months tax free >9 and you will get it all back in the end.

[LJ Driver]

Questions:

In 2009 I will likely be in a CZTE area for 2 months. I will get paid the bonus in June, and not be in the zone until Nov-Dec. I would like to deposit the entire bonus, plus the 16,500 into the TSP.

- Is this possible/legal? Do I need to be in the CZTE area the month I receive the bonus to deposit the entire amount in the TSP? (With the obvious risk that if I don't get to the CZTE in 2009, I am royally fucked)

- If not, could I up the amount deposited each month during 2009 to total (25,000) + (my standard percentage), then live off the bonus?

- Or, could I elect to deposit 100% of my pay in Nov-Dec and live off the bonus in those months as required?

- If I am in the CZTE area for only one or two months in a year, am I still eligible to deposit 49,000 in the TSP?

[Jughead]

In 2009 I will likely be in a CZTE area for 2 months. I will get paid the bonus in June, and not be in the zone until Nov-Dec. I would like to deposit the entire bonus, plus the 16,500 into the TSP.

CZTE in Nov/Dec has no impact on your taxable income earned in June for purposes of TSP contributions. In any case, you can't deposit the whole bonus--currently you're limited to $16,500 tax-deferred TSP contribution annually & $7,368.30 tax-exempt (whether deposited into TSP or not) in any single month. These are 2009 numbers, and I'm assuming you're an officer & under age 50 by nature of your question. Add those up, and $23,868.30 is the max you can contribute in any one month.

- Is this possible/legal? Do I need to be in the CZTE area the month I receive the bonus to deposit the entire amount in the TSP? (With the obvious risk that if I don't get to the CZTE in 2009, I am royally ######ed)

No, not possible (same answer as above). Yes, you have to be in the CZTE zone during the month you get the bonus for it to have any impact on your tax exempt amount (whether or not you put it in the TSP). If your taxable income already exceeds the CZTE limit (typically, O-4 w/ 12 years on flight pay, if memory serves), then being in a CZTE zone during your bonus month won't affect your taxes at all (i.e., the entire bonus will be taxable, just as if you were at home).

- If not, could I up the amount deposited each month during 2009 to total (25,000) + (my standard percentage), then live off the bonus?

- Or, could I elect to deposit 100% of my pay in Nov-Dec and live off the bonus in those months as required?

- If I am in the CZTE area for only one or two months in a year, am I still eligible to deposit 49,000 in the TSP?

None of these work, either, for much the same reasons. The $49K annual limit doesn't give you license to deposit income you don't have into the TSP. What that means is, your $16,500 deferred contribution limit applies whether or not you're in the CZTE. Let's say you max that out before you get to the desert. You've got $32,500 "left" before you hit that limit--but, the only flavor of money you get as a military member that you can put in the TSP but not count against the $16.5K limit is tax-exempt pay. The $7,368.30 monthly limit kicks in, so you can only add toward that $32.5K month-by-month at $7.3K each--in other words, you have to be in a CZTE zone at least 5 months to reach the $49K limit, AND that assumes that you've maxed out your deferred contribution limit of $16.5.

My approach is to make sure my "normal" monthly contributions are set to ensure I'll reach the annual limit ($16,500 this year) whether or not I'll be in the desert. If I find myself going to the desert, I bump everything to the max and live off of savings as you suggest (I don't need much--as a single guy, my expenses drop to virtually nothing when I deploy). This runs the risk of "missing" the first month's max TSP contribution, since you have to make the change in the month prior (not sure exactly when the cut-off date is) for the contribution to change. But, if you have a predictable deployment schedule, this will work.

BTW, if you're looking to max your desert $$$, make sure to max out the USSDP, too--up to $10K at 10%, where ya gonna beat that these days??

[Learjetter]

can some of the "experienced" dudes explain the bonus process to us young guys? i realize i'm probably not in a position to be getting one, but this is one of the many "pilot things" they don't teach at UPT. thanks.

Basics in a nutshell: Once you finish UPT you are placed on "aeronautical orders" and your second "year of Aviation Service" (YAS) begins. The year your UPT commitment expires, you become "eligible" for Aviation Continuation Pay (The Bonus). The rules in effect for the fiscal year your UPT commitment ends are the rules you play under. Not the year before, not the year after. USAF can change the rules at anytime--what your buddy got last year may not be what you get this year. Services are authorized by Congress to pay "up to" $25K per year as a retention bonus to pilots. USAF normally chooses the $25K for pilots, about $15K for ABMs or Navs. Last year, rules said pilots who sign a 5yr commitment get $25K per year extra for the five years. You get paid on your anniversary date of the day you sign the contract. In my case, it is Oct 26th.

Speaking of pay--anything on your LES with the word PAY on it is Taxable (Base Pay, Aviation Continuation Pay, Hostile Fire Pay). Anything not labeled "pay" isn't taxed (Housing Allowance, Basic Allowance for Subsistence, etc.)

Fly Safe

[Highside]

Now that the Defense Authorization Bill has passed the Senate (awaiting signature), anyone more savvy on the issue care to weigh in on whether the Pilot Bonus will be available this year. A cursory glance seems to indicate no changes to retention bonuses...