Hot Topics, Relocation, Taxation

Tax Reform Eliminates Moving Expense Deduction-The Impact on Corporate Relocation

The finals days of 2017 saw the House/Senate pass the most sweeping change to US tax code in decades;  the Tax Cuts and Jobs Act.   The act, now signed into law, includes changes that will impact relocation and talent mobility programs.

Perhaps the biggest change to the tax code is the elimination of the exclusion/deduction for moving expenses such as the shipment of household goods, storage, and final move costs.   For corporations that gross up for taxable reimbursements, this will result in thousands more in tax gross-up dollars per transferring employee. Written policy language will also require revision along with necessary adjustments to relocation budgets to allow for the increased cost of tax gross up.  The average company cost for moving/storing household goods of transferring employees and final move is over $14,500.  It is important to remember that corporations can still deduct moving expenses it pays to or on behalf of employees.

Prior to passage of the Tax Reform Bill certain moving expenses were considered excludable/deductible if certain criteria were met. The criteria included meeting the time and distance tests.  The transferring employee needed to commence work in the new job (at the new work location) and work full-time for at least 39 weeks within the first 12 months after the move.  He/she also needed to demonstrate that the new place of employment was at least 50 miles away from the old home than the old place of employment.   The new tax reform law effectively negates the need for the above criteria since moving expenses are no longer deductible/excludable.

 Additional Relocation-Related Tax Reform Implications

  • The mortgage interest deduction was reduced to $750,000 from $1,000,000 for mortgages originating on or after December 15, 2017. This is likely to affect transferring employees looking to purchase homes in higher cost of housing areas.  Recruiting talent to relocate to these areas could become problematic.
  • The state and local tax deduction is now capped at $10,000 in 2018 through 2025. This again could impact employees transferring into higher tax states as the cap will decrease the ability to deduct these items.
  • Tax Rates and Income Brackets:  The law’s seven federal tax brackets will now have the following rates:

Relocation America International is actively working with our clients and prospects to insure their programs are fully compliant with the new tax law and relocation policies are updated to reflect the new tax reality.

The above information is for general information only and is not presented as tax advice. Please consult with your tax advisor prior to making decisions and taking any action.  For more information contact us at info@RAInternational.com or visit www.RAInternational.com

Relocation

Happy Thanksgiving from Relocation America International

 

 

All of us at Relocation America International would like to wish our followers and clients a safe and Happy Thanksgiving!

 

Hot Topics, Relocation

Corporate Housing Outlook for 2017

The Corporate Housing Providers Association (CHPA) recently released it’s annual Corporate Housing Industry Report for 2017. The industry overview report highlights market-specific benchmarking information on 62 North American Metropolitan Statistical Areas.

According to the industry survey the US corporate housing average daily rate (ADR) increased to $150.44 from $142.00 the previous year.  With temporary living expenses being a major component of most relocation budgets Relocation America International has partnered with Reloquest and it’s groundbreaking temporary housing procurement platform to help reign in this cost.

Highlights from the report include:

  • The number of occupied units has increased 12.5% since 2012. As residential apartment construction increased, the availability of units grew, as did accommodated demand. Recent research by Integra Realty Resources reported that the cyclical peak of apartment construction is expected in the next one to two years, indicating unit availability for corporate housing should be higher in 2017.
  • Survey data is collected on the various types of corporate housing units including studio, one, two, three-bedroom and other number of rooms. This mix has been fairly consistent for the past nine years, with one-bedroom units making up 48% to 51% of inventory.
  • The average stay in a US corporate housing unit was 86 nights an increase of two nights from the previous year.  The average length of stay has trended upward since 1999.
  • For the sixth successive year, relocation was the largest reason for using corporate housing in the US. Project/Training was the second most cited use of corporate housing.  Technology and healthcare are the largest generators of corporate housing demand by industry.

For a complete copy of the report contact the CHPA by clicking here

About Relocation America International:

Relocation America International is a full service relocation management company located in Southfield, Michigan dedicated to providing innovative relocation services, value-added support, and superior customer service to clients relocating families domestically and globally.

Visit http://www.RAInternational.com for more information.