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Tax Update: Unreimbursed Moving Expenses

 

One of the changes caused by the Tax Cuts and Jobs Act (TCJA) is suspending the ability to deduct unreimbursed moving expenses, as well as employee expenses related to business until 2026. The only exception to this is for members of the military on active duty during a permanent change of station who move per military order.  In addition, when a company previously reimbursed an employee for moving expenses, that amount was non-taxable to the employee. With these changes from TCJA, the moving expense reimbursement is now considered taxable income.

Prior to TCJA, an individual could be reimbursed tax-free by an employer or deduct qualified unreimbursed moving expenses from their individual return, as long as they met certain requirements. To previously qualify, an individual had to move for a new job that was at least 50 miles farther from the old home than the distance between the old home and the previous job and the taxpayer worked full-time for 39 weeks during the first 12 months while at the new home.

The other change in TCJA relates to unreimbursed employee expenses. Previously, work related expenses over 2% of a worker’s gross income, as well as any travel or mileage expenses were deductible on the employee’s personal return. However, these are no longer deductible as of the start of 2018, putting a strain on employees to deal with these expenses out-of-pocket.

Knowing this, here are few tips to consider:

  • Companies should update their reimbursement policy to reflect the law change as previous polices are likely now out of date.
  • Employers may want to gross up any reimbursement for moving expenses so employees are not burdened with the tax on this income.
  • Employees are now more likely to ask employers for reimbursement for business expenses if the company was not previously providing reimbursement or using a flat allowance for employee expenses, consider adding new policies to address this matter.

 

John Pearson is a Staff Accountant at Katz, Nannis + Solomon, P.C. If you have any questions or would like to speak with one of our tax professionals, please contact our office at 781-453-8700.

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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