Sometimes companies move or redistribute their resources. When employers want to retain their best employees, they may offer to relocate them to move with the company or accept a new position. In addition, they may offer to relocate a highly desirable job candidate as a term of employment. Until 2018, companies who paid to relocate an employee or new hire were able to deduct those expenses on their taxes. In addition, when employees were reimbursed for corporate relocation costs, that amount was not considered taxable income.
Moving Expenses are No Longer Tax-Free
Changes to the Federal tax code have suspended tax-exemption until 2025, except for military-related moving expenses. So what do these changes in tax law mean for employers and employees who are contemplating a corporate relocation?
Changes for Companies
Consider revising your company’s relocation policies to reflect tax changes if you have not already done so. According the 2018 Atlas Corporate Relocation Survey, 74% of businesses surveyed agree that changes to their corporate relocation policies are necessary. This is significant, as no other policy change has close to even 50 percent potential adoption. However, about 1/3 of businesses plan to expand the use of lump sum payments to address the tax code alteration. In addition, nearly 6 out of 10 companies - and 7 in 10 of those with more than 5,000 employees - plan to gross-up taxable relocation benefits.
Changes for Individuals
Under the previous tax law, taxpayers could deduct qualified costs of moving household goods and personal effects, along with certain travel costs of moving to their new home for a corporate relocation. You should know that the latest tax changes have suspended the moving expense deduction. This means you will not be able to deduct moving expenses starting this year. The only exception to the new law is for military service members who are moving to a new base. If you moved during 2017, you can still deduct moving expenses on your 2017 tax return filed in 2018.
Another big change – if your company is paying for your work-related move, whether outright or by reimbursing you for moving costs – this will now be considered taxable income and is required to be added to your W-2 by your employer. Check with a tax professional if you have any questions about deductions or taxable income.
Partner with Bisson
Bisson can help you navigate corporate relocation changes. With decades of experience, we can be your reliable moving resource. We have the flexibility to adapt to your company’s changing needs and the knowledge to address your questions and concerns. Contact us for a consultation before you make changes to your corporate policy or when you are ready to schedule a move.