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

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Intercultural Tools for Expats

ICL_GRAPHIC_2As members of the Worldwide Employee Relocation Council we at Relocation America can certainly attest to the many benefits of membership.

Benefits of membership include an annual subscription to MOBILITY magazine, access to an extensive library of Learning Zone Sessions (designed to deliver a quick 30 minutes of information-packed industry know-how) and access to their online library of resources housing research reports and benchmarking data on just about every relocation related topic to you can think of.  Continue reading “Intercultural Tools for Expats”

Hot Topics

New relocation survey points to an overall increase in transfer volume

A new survey from Worldwide ERC® , the workforce mobility association, noted that last year, U.S. companies that transferred employees saw a slight decline in domestic transfer activity compared to the previous year, but an increase in hiring has led to optimistic projections for 2012.  Continue reading “New relocation survey points to an overall increase in transfer volume”