Reimbursed employee moving expenses no longer tax-deductible in US Reimbursed employee moving expenses no longer tax-deductible in US

Reimbursed employee moving expenses no longer tax-deductible in US
05 Oct 2018

The US Internal Revenue Service will allow employees to continue deducting employer payments or reimbursements relating to moving expenses from their taxes for now, as long as they were paid out prior to 2018.

But the US Tax Cuts and Jobs Act means this will not be the case for long, according to Accounting Today. The tax overhaul passed by Congress last year suspended the right for most employees to exclude moving expenses that were reimbursed or paid by an employer from their income as of this year. 

This means that these amounts are now taxable, except in the case of active-duty members of the armed forces as their moves are tied to a military-ordered permanent change of station.

For now, under Notice 2018-75, reimbursements paid by an employer to an employee during 2018 to cover qualified moving expenses that are incurred in a prior year, are not subject to either federal income or employment taxes. The same holds true if an employer pays a moving company in 2018 for moving services provided to an employee prior to 2018.

To qualify for the tax break, any reimbursements or payments must cover work-related moving expenses that would have been deductible if the employee had paid out money directly before 1 January 2018. The employee must not have deducted them from their earnings in 2017.

Employers that have already treated the reimbursements or payments as taxable events should follow normal employment tax adjustment and refund procedures found in Publication 15, Section 13, or Form 941-X.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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The US Internal Revenue Service will allow employees to continue deducting employer payments or reimbursements relating to moving expenses from their taxes for now, as long as they were paid out prior to 2018.

But the US Tax Cuts and Jobs Act means this will not be the case for long, according to Accounting Today. The tax overhaul passed by Congress last year suspended the right for most employees to exclude moving expenses that were reimbursed or paid by an employer from their income as of this year. 

This means that these amounts are now taxable, except in the case of active-duty members of the armed forces as their moves are tied to a military-ordered permanent change of station.

For now, under Notice 2018-75, reimbursements paid by an employer to an employee during 2018 to cover qualified moving expenses that are incurred in a prior year, are not subject to either federal income or employment taxes. The same holds true if an employer pays a moving company in 2018 for moving services provided to an employee prior to 2018.

To qualify for the tax break, any reimbursements or payments must cover work-related moving expenses that would have been deductible if the employee had paid out money directly before 1 January 2018. The employee must not have deducted them from their earnings in 2017.

Employers that have already treated the reimbursements or payments as taxable events should follow normal employment tax adjustment and refund procedures found in Publication 15, Section 13, or Form 941-X.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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