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Relocation Survey Highlights Company Reactions to Suspension of Moving Expense Deduction/Exclusion

Prior to its 2018 Global Workforce Relocation Conference held in Seattle on October 2018, the Worldwide Employee Relocation Council conducted an on-line survey in which it asked members how their companies were reacting to the elimination of the moving expense deduction/exclusion (MED) by the Tax Cuts and Jobs Act (TCJA). The TCJA suspended both the deduction and the exclusion for the years 2018 through 2025. As a result, expenses for household goods movement, and final move travel, are not deductible for 2018, and company reimbursements/payments of those expenses are taxable to the transferee.

The respondents were asked how, if at all, the loss of the MED was impacting move volume. Almost 78% of those who responded to that question reported that move volume remained about the same, with an additional 4% reporting increases. About 15% reported that volume decreased somewhat, with 3% reporting significant decreases.

Another question asked was whether the loss of the moving expense deduction will lead to increased use of lump sum programs.  When Worldwide ERC® asked that question directly, 59% reported that it had not, with 18% reporting that it had.  An additional 23% reported that it had not yet, but that their policies were under review.  However, when asked if they were changing specific policies, almost 54% suggested their companies were using more lump sum programs.  While this may appear inconsistent with the responses noted above, it is likely that it reflects respondents’ impressions of the industry as a whole; rather than the experience of their own company.
Data presented earlier in the year suggested that most companies were grossing up. However, the survey data suggests a more equivocal picture. The question asked whether companies are changing their gross-up policies. About 47% said they were not, but 36% reported that they were. An additional 17% said they had not changed, but the policy was under review.
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Fewer Job Seekers Relocating for New Positions

The percentage of job seekers relocating for new employment has fallen dramatically since the late 1980s, when over one-third of job seekers were willing to move for a new position. Just 11 percent of job seekers relocated for work over the last decade, compared to nearly 19 percent of workers who relocated for new positions in the previous decade, according to new data released by global outplacement consultancy Challenger, Gray & Christmas, Inc.

Just over 10 percent of job seekers relocated for work in the first six months of 2018, virtually unchanged from the relocation rate in the first two quarters of 2017. The relocation rate in the third quarter of 2017 was 16.5 percent, the highest quarterly relocation rate since the second quarter of 2009, when 18.2 percent of job seekers moved for new positions. However, by the fourth quarter of last year, just 7.5 percent of job seekers relocated, bringing the annual average to 11.2 percent, according to the firm.

The Challenger data is based on a survey of approximately 1,000 job seekers who successfully found employment each quarter.

“The dot-com bubble that left companies flush with cash in the second half of the 1990s, allowing them the potential to offer generous relocation packages to attract talent, burst in 2000. That burst led to an increase in job cuts nationwide, and this period seems to delineate the end of the relocation trend. As companies found themselves in cost-cutting mode, it seems many chose to find local candidates and spare the expense of relocation reimbursement in the years following,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, Inc.

In 2000, the relocation rate was 22.9 percent, the last year the rate hit above 17 percent. Since then, the annual relocation rate for job seekers has averaged 12.7 percent.




“The one-fifth to one-quarter of workers who were moving to find positions in the late 1990s is nothing compared to what we saw in the mid-to-late 1980s, when nearly one-third of workers were moving for new positions. Much of that movement could be attributed to economic recovery policies after the 1982 recession,” said Challenger.

The current relocation rate of 10 percent is 72 percent lower than in the mid-to-late 1980s. The average annual relocation rate from 1986 (the first year of Challenger tracking) to 1990 was 35.2 percent.

After a deep recession in 1982, the economy sustained the longest period of growth since WWII between 1983 and 1987. Housing prices rebounded, allowing people to sell and potentially relocate for better positions.

“We saw something similar in 2009, when housing prices began to rise after the Great Recession and the annual relocation rate hit 13 percent,” said Challenger.

Now, other reasons could explain the falling relocation rate, according to Challenger.

“The expansion in technology has also allowed companies to grow exponentially, giving opportunities to workers across the country. Over the years, in many cases, companies have found it more beneficial to go to where the workers – and favorable business conditions – already exist rather than have talent come to them,” he added.

Source:  Challenger, Gray & Christmas, Inc.
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Repayments Under U.S. Payback Agreements No Longer Deductible

A little noticed effect of the Tax Cuts and Jobs Act (TCJA) is that repayments required of employees under agreements to repay relocation costs if the employee leaves within a short time will no longer be deductible.

Relocation is expensive. Companies want to make sure they receive some benefit in the form of future services for the costs incurred to move an employee. Therefore, relocation programs generally incorporate provisions requiring employees to repay all or a part of the expenses incurred to relocate them unless they continue to work for the company for a specified period.

When the employee does in fact leave early, the tax treatment of the employee’s repayment of costs becomes an issue. Repayments in the same year as the move are not at issue, because such repayments are accounted for by simply adjusting withholding and payroll taxes. No deduction by the employee is necessary. However, if the repayment is in a year subsequent to the move the employee has historically been allowed to claim a deduction for the repayment.

In Rev. Rul. 79-311, 1979-2 C.B. 25, the United States Internal Revenue Service (IRS) held that an employee who erroneously received wages and repaid them in a subsequent year was entitled to an itemized deduction as an employee business expense. Rev. Rul. 79-311 has been applied to repayment of moving expenses in PLRs 9050053 and 9313015 (IRS private letter rulings).

Such a deduction, however, would be a “miscellaneous itemized deduction”. The TCJA suspended the availability of miscellaneous itemized deductions beginning in 2018 through 2025. Therefore, repayments in years subsequent to the move are no longer deductible.

An alternative to an itemized deduction was to claim an adjustment under section 1341 (the so-called “claim of right” provision). Section 1341 provides that when a taxpayer restores a substantial amount (defined as exceeding $3,000) received under a claim of right, the taxpayer can either claim the allowable deduction in the year of restoration, or recompute the tax for the year in which the amount was received and claim a deduction in the current year for the amount the taxes would have been reduced in that prior year, whichever is most beneficial. The section 1341 adjustment is not subject to the 2 percent floor which was applicable to miscellaneous itemized deductions.

However, section 1341 is not applicable unless a deduction was allowable for the current year in the first place. Therefore, it cannot be used beginning in 2018 for repayments under payback agreements.

How This Affects Mobility

Repayments after the year of the move are no longer deductible and that may have serious consequences. Repayments tend to be substantial. Therefore, the loss of deductibility by the employee may be quite painful from a financial standpoint, and may inhibit companies’ efforts to enforce payback agreements.

Source: Worldwide Employee Relocation Council

About Relocation America International

Relocation America International is a full service relocation management company dedicated to providing innovative relocation services, value added support, and superior customer service to clients relocating families domestically and internationally. Visit for more information about our services or contact us at