Moving Deductions are Kaput
Article Highlights: - Prior Law Deduction
- Deduction Repealed
- Military Exception
- Employer Reimbursement
- Reimbursement Gross Up
Unfortunately, tax reform effectively repealed that deduction after 2017, except for members of the Armed Forces on active duty who move pursuant to a military order. On top of that, if an employer reimburses the employee for the expenses—whether by paying a moving van company, airline, or other vendor directly, or by reimbursing the employee for their moving expenses—the reimbursement will be treated as taxable wages subject to withholding of income, Medicare, and Social Security taxes.
If a move is required by an employer, there is a possible workaround by having the employer include enough in the reimbursement to cover the taxes the employee will incur as a result of the reimbursement. This is commonly referred to as gross up, and the additional amount paid to cover the taxes is also taxable. Thus, the additional tax must be recomputed several times in order to determine the exact reimbursement.
If you need assistance in determining the gross up reimbursement, please give this office a call.
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