2018 Tax Changes Affect Employer Paid Moving Expenses
Alan M. West, Assistant Vice President and University Controller
The Tax Cuts and Jobs Act passed by Congress in December 2017 repealed the deduction for moving expenses making employer paid moves or reimbursements a taxable benefit to the employee. Employer paid moving expenses in 2018 are no longer a deductible expense, meaning they are subject to Social Security (or FICA Alternative), Medicare and Federal withholding taxes.
What is changing?
Under previous law, qualified moving expense reimbursements provided by an employer to an employee were excluded from the employee’s income. Qualified moving expenses were payments received by an employee from an employer as a payment for or reimbursement of expenses that would be deductible as moving expenses under IRC section 217, if they had been directly paid or incurred by the employee.
The Tax Cuts and Jobs Act repealed the exclusion for qualified moving expense reimbursements. The provisions are effective for tax years beginning after 2017. As a result, all University payments made after 2017 for employee moving expenses (whether paid directly to the vendor or reimbursed to the employee) will be taxable on the employee’s paycheck and included on the employee’s Form W-2 for the year.
Options for Paying for Employee Moving Expenses
Departments have the following options to pay for or reimburse employee moving expenses.
1. Departments may provide a lump sum relocation payment to incoming employees (create an Additional Pay ePAF). This payment will be included in the employee’s paycheck earnings and taxed accordingly.
2. Departments may create a requisition, generate a purchase order and direct pay one of the contracted moving companies for the employee’s moving expenses. This activity is coordinated through Procurement Services (https://procurement.ufl.edu/uf-departments/household-moving-made-simple/). Departments must provide copies of the paid receipts to Payroll and Tax Services so that the amount paid can be taxed on the employee’s paycheck and added to the employee’s Form W-2. The amount paid for moving expenses will be included in the employee’s taxable income but no additional funds will be paid out to the employee.
3. Departments may agree to reimburse employees for all or part of their moving expenses. Departments should follow the Self-Move Guidelines (https://procurement.ufl.edu/uf-departments/household-moving-made-simple/self-move/). Moving expense reimbursements will be added to the employee’s paycheck earnings, Form W-2, and taxed accordingly.
What happens to any 2018 moves already paid in 2018?
Departments need to contact Payroll and Tax Services for assistance in reporting any direct pay moving expenses already incurred for 2018.
What office can assist me if I have questions?
Please contact University Payroll and Tax Services for assistance at (352)392-1231 or firstname.lastname@example.org. While they cannot provide tax advice to employees, they can address general questions regarding payroll taxes.