Employer paid moving expenses, tax deductible?

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theRemedy
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Employer paid moving expenses, tax deductible?

Post by theRemedy » Sun Feb 10, 2019 1:46 am

Hi All,

Firs time posting here. I moved from South Carolina to Washington State with the same employer. My employer has a generous relocation package and covered all expenses; shipping home goods, vehicles, flights for the family, and temporary lodging and expenses. All the expenses were paid directly by my employer and were reported on my W2 as income (box 1), my employer also paid estimated income tax for me on these expenses. I'm just starting to look into the rules for relocation expenses to see how to report on my taxes, so any help is appreciated. I was given a statement with a breakdown of all expenses paid. My question is, are all these expenses just treated as ordinary income for me? Meaning, I do not get to claim any deductions for these expenses?

Thanks!

RudyS
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Re: Employer paid moving expenses, tax deductible?

Post by RudyS » Sun Feb 10, 2019 10:07 am

duplicate. sorry.
Last edited by RudyS on Sun Feb 10, 2019 12:15 pm, edited 1 time in total.

RudyS
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Re: Employer paid moving expenses, tax deductible?

Post by RudyS » Sun Feb 10, 2019 10:11 am

If you were reimbursed, then I do not see how you would have a deduction. The reimbursement is on your W-2, plus extra to reimburse you for the taxes. Seems you are even. Nothing to tell the IRS.

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HueyLD
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Re: Employer paid moving expenses, tax deductible?

Post by HueyLD » Sun Feb 10, 2019 10:14 am

theRemedy wrote:
Sun Feb 10, 2019 1:46 am
Hi All,

Firs time posting here. I moved from South Carolina to Washington State with the same employer. My employer has a generous relocation package and covered all expenses; shipping home goods, vehicles, flights for the family, and temporary lodging and expenses. All the expenses were paid directly by my employer and were reported on my W2 as income (box 1), my employer also paid estimated income tax for me on these expenses. I'm just starting to look into the rules for relocation expenses to see how to report on my taxes, so any help is appreciated. I was given a statement with a breakdown of all expenses paid. My question is, are all these expenses just treated as ordinary income for me? Meaning, I do not get to claim any deductions for these expenses?

Thanks!
Did you by any chance move in 2017 but reimbursement did not arrive until 2018?

If both happened in 2018, you will pay taxes on the reimbursements and none of which is deductible.

https://www.irs.gov/newsroom/tax-reform ... g-expenses

retiredjg
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Re: Employer paid moving expenses, tax deductible?

Post by retiredjg » Sun Feb 10, 2019 10:49 am

Not sure if this is the same situation, but when my employer moved me, they paid the costs, I had to report those costs as income, then I deducted the moving expense on my taxes. It was pretty much a wash in the end.

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HueyLD
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Re: Employer paid moving expenses, tax deductible?

Post by HueyLD » Sun Feb 10, 2019 10:53 am

Retiredjg,

In the old days, what you did was indeed the way to go.

But the new tax law TCJA makes moving expense reimbursements fully taxable whie taking away the ability to deduct such expenses that have been added to the income.

I guess it is still better to pay taxes on the reimbursements than to pay 100% of the cost.

terran
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Re: Employer paid moving expenses, tax deductible?

Post by terran » Sun Feb 10, 2019 10:57 am

retiredjg wrote:
Sun Feb 10, 2019 10:49 am
Not sure if this is the same situation, but when my employer moved me, they paid the costs, I had to report those costs as income, then I deducted the moving expense on my taxes. It was pretty much a wash in the end.
It does sound like the same situation, but as HueyLD pointed out, that's no longer how it works as of 2018 as moving expenses are no longer deductible. This is important for people to know going forward as it is a good idea to negotiate to have moving expenses grossed up to cover the added tax on the reimbursement. It sounds like maybe that's what happened in theRemedy's case.

retiredjg
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Re: Employer paid moving expenses, tax deductible?

Post by retiredjg » Sun Feb 10, 2019 11:08 am

Oh dear. This is not good. :(

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TomatoTomahto
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Re: Employer paid moving expenses, tax deductible?

Post by TomatoTomahto » Sun Feb 10, 2019 11:21 am

retiredjg wrote:
Sun Feb 10, 2019 11:08 am
Oh dear. This is not good. :(
It happened to us, but employer was kind enough to “gross up” the withholding, so we are essentially square on the reimbursement. There were caps on reimbursement, so it wasn’t a “free” move, but pretty fair.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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TomatoTomahto
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Re: Employer paid moving expenses, tax deductible?

Post by TomatoTomahto » Sun Feb 10, 2019 11:29 am

I just looked at our move sheet. It says:
Qualified moving expenses may be deductible in certain states. Any of these expenses reimbursed to you or paid on your behalf may already be excluded from your State wages. Care should be taken when completing state deduction forms, so that "double deductions" are not taken in error.

* Tax assistance shown above has been deposited with the applicable tax authorities by your employer on your behalf. Tax assistance is considered taxable income and is included in both wages and taxes withheld for each applicable tax authority on your Form W-2.
ETA: Apparently, qualified moving expenses may be deductible in AR, AZ, CA, HI, IA, MA, MN, NJ, PA, and VA.
Okay, I get it; I won't be political or controversial. The Earth is flat.

retiredjg
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Re: Employer paid moving expenses, tax deductible?

Post by retiredjg » Sun Feb 10, 2019 11:44 am

TomatoTomahto wrote:
Sun Feb 10, 2019 11:21 am
retiredjg wrote:
Sun Feb 10, 2019 11:08 am
Oh dear. This is not good. :(
It happened to us, but employer was kind enough to “gross up” the withholding, so we are essentially square on the reimbursement. There were caps on reimbursement, so it wasn’t a “free” move, but pretty fair.
I figured there is a way to be pretty fair on taxes, federal taxes anyway. But what about collateral damage from the increased AGI...losing eligibility to deduct tIRA contributions or to contribute directly to Roth IRA...pushing someone into NIIT territory...pushing a retired spouse into a higher IRMAA tier...things like that. This seems like a bad thing to me, but obviously I know little about it at this point.

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Re: Employer paid moving expenses, tax deductible?

Post by DVMResident » Sun Feb 10, 2019 11:47 am

HueyLD wrote:
Sun Feb 10, 2019 10:53 am
I guess it is still better to pay taxes on the reimbursements than to pay 100% of the cost.
Assuming you want the service or goods. Some of the relocation packages may have low utility/high costs.

For example, my spouse stopped working after we moved and the relo package included career consultation service that charged the employer if we picked up the phone. This added to the bill and increased our liability both on the tax front (you owe taxes on the gross-up, which is a small percent of a percent...but still) and the payback we would owe to the employer if I voluntarily separated within the repayment window (2 years in my case).

If you don't want the service, I would recommend not accepting the portions you don't want.

EDIT: clarification statements added.
Last edited by DVMResident on Sun Feb 10, 2019 3:00 pm, edited 1 time in total.

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TomatoTomahto
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Re: Employer paid moving expenses, tax deductible?

Post by TomatoTomahto » Sun Feb 10, 2019 11:49 am

retiredjg wrote:
Sun Feb 10, 2019 11:44 am
TomatoTomahto wrote:
Sun Feb 10, 2019 11:21 am
retiredjg wrote:
Sun Feb 10, 2019 11:08 am
Oh dear. This is not good. :(
It happened to us, but employer was kind enough to “gross up” the withholding, so we are essentially square on the reimbursement. There were caps on reimbursement, so it wasn’t a “free” move, but pretty fair.
I figured there is a way to be pretty fair on taxes, federal taxes anyway. But what about collateral damage from the increased AGI...losing eligibility to deduct tIRA contributions or to contribute directly to Roth IRA...pushing someone into NIIT territory...pushing a retired spouse into a higher IRMAA tier...things like that. This seems like a bad thing to me, but obviously I know little about it at this point.
I agree in principle. Those particular negative effects left the station for us absent the move, but it could be damaging for some families.

I want to avoid getting political, but there are many hidden discontents in the new tax laws, beginning with surprises for many who were accustomed to getting refunds, people who moved, etc.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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corn18
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Re: Employer paid moving expenses, tax deductible?

Post by corn18 » Sun Feb 10, 2019 11:56 am

We moved in 2018 and the company paid all expenses. They did gross up my pay and reported that on my W-2, so I do not have to report those on my return, I don't think, because it shows up as W-2 income.

I was a bit irritated with my company's gross up policy. They use the IRS rules and gross up federal @ 22%. But I am in the 37% tax bracket, so I take a tax hit at my marginal rate. Had a chat with them about that and got nowhere. It's a $100k package and we used all of it, so that costs me $15k in extra taxes.
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HueyLD
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Re: Employer paid moving expenses, tax deductible?

Post by HueyLD » Sun Feb 10, 2019 11:57 am

TomatoTomahto wrote:
Sun Feb 10, 2019 11:29 am
I just looked at our move sheet. It says:
Qualified moving expenses may be deductible in certain states. Any of these expenses reimbursed to you or paid on your behalf may already be excluded from your State wages. Care should be taken when completing state deduction forms, so that "double deductions" are not taken in error.

* Tax assistance shown above has been deposited with the applicable tax authorities by your employer on your behalf. Tax assistance is considered taxable income and is included in both wages and taxes withheld for each applicable tax authority on your Form W-2.
ETA: Apparently, qualified moving expenses may be deductible in AR, AZ, CA, HI, IA, MA, MN, NJ, PA, and VA.
Hi TT,

Moving expenses are no longer deductible in AZ because the state legislators have not proactively made an exception for conformity to the federal law on this item.

Back to the ole Wild West days!!

pdavi21
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Re: Employer paid moving expenses, tax deductible?

Post by pdavi21 » Sun Feb 10, 2019 12:03 pm

Moving expenses used to be one of the best deductions out there. Most large employers will not add reimbursements to W2 Wages or withhold tax or FICA. Very rarely could a reimbursable expense even be deducted before.
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TomatoTomahto
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Re: Employer paid moving expenses, tax deductible?

Post by TomatoTomahto » Sun Feb 10, 2019 12:05 pm

HueyLD wrote:
Sun Feb 10, 2019 11:57 am
Hi TT,

Moving expenses are no longer deductible in AZ because the state legislators have not proactively made an exception for conformity to the federal law on this item.

Back to the ole Wild West days!!
Maybe I’m getting mellow in my old age (wife disagrees :D ), and I guess I’d be miffed if the move were entirely for the benefit of the employer, but we
- sold a house we wanted to sell
- bought a house we wanted to buy
- moved our lives from old house to new house

All in all, if we are not completely reimbursed for all expenses, c’est la vie.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Employer paid moving expenses, tax deductible?

Post by Gill » Sun Feb 10, 2019 12:07 pm

corn18 wrote:
Sun Feb 10, 2019 11:56 am
We moved in 2018 and the company paid all expenses. They did gross up my pay and reported that on my W-2, so I do not have to report those on my return, I don't think, because it shows up as W-2 income.

I was a bit irritated with my company's gross up policy. They use the IRS rules and gross up federal @ 22%. But I am in the 37% tax bracket, so I take a tax hit at my marginal rate. Had a chat with them about that and got nowhere. It's a $100k package and we used all of it, so that costs me $15k in extra taxes.
I don't know how a company could consider the tax bracket of every employee in their gross up policy.
gill
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deskjockey
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Re: Employer paid moving expenses, tax deductible?

Post by deskjockey » Sun Feb 10, 2019 12:22 pm

Be happy your employer grossed up. Uncle Sam isn't doing that for new hires, some of whom have ended up with $20-30k tax bills on a starter salary because of cross-country moves (and the fact that nearly everyone involved int he process overcharges the government). Initially all feds moving were impacted, but some regulatory changes exempted overseas moves recently, which helped quite a few folks: https://www.stripes.com/news/some-overs ... n-1.566311

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Re: Employer paid moving expenses, tax deductible?

Post by Epsilon Delta » Sun Feb 10, 2019 12:30 pm

Gill wrote:
Sun Feb 10, 2019 12:07 pm
I don't know how a company could consider the tax bracket of every employee in their gross up policy.
gill
They could ask for the tax returns and run pro-forma numbers. (Or have a discreet accountant trusted by both sides work the numbers.)

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corn18
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Re: Employer paid moving expenses, tax deductible?

Post by corn18 » Sun Feb 10, 2019 12:41 pm

Epsilon Delta wrote:
Sun Feb 10, 2019 12:30 pm
Gill wrote:
Sun Feb 10, 2019 12:07 pm
I don't know how a company could consider the tax bracket of every employee in their gross up policy.
gill
They could ask for the tax returns and run pro-forma numbers. (Or have a discreet accountant trusted by both sides work the numbers.)
Agree. It really isn't that hard. Especially at my level. Just ask me, I'll be glad to tell you and provide documentation. Or just use my company payroll info. The company W-2 alone puts me well into the 37% tax bracket, so it isn't really rocket science.

I'm not asking them to gross up beyond what my company salary requires. If my company pay put me in the 22% tax bracket and I had a side gig or something pushing me into the 37% bracket, I wouldn't ask my company to gross up to 37%. But my company pay puts me into the 37% bracket all by itself, so gross it up to 37%.
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Watty
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Re: Employer paid moving expenses, tax deductible?

Post by Watty » Sun Feb 10, 2019 1:01 pm

It has been a long time and it was under the old rules but when I did a corporate relocation I paid to have an accountant do my taxes that year even though I normally do my own taxes. Between doing two state tax returns, selling and buying a house, and the moving expenses I am glad I did and hiring someone to do my taxes that year. A big part of do-it-yourself home repairs is knowing when to call in a pro and this may be a similar situation so it could be a good idea to hire someone this year.

This is dated so they may not apply now but I few things that I had to watch out for when I did the relocation.

1) The relocation expenses could make you a "Highly compensated employee(HCE)" which can limit how much you can contribute to a 401k. This does not apply to all 401k plans. That could also limit your ability to make a Roth contribution or a deductible IRA contribution. If you have pretty high income you may also be subject to an additional medicare tax.

2) The higher income may put you in an income range where some tax credits are phased out. I think it has changed but when I relocated I think part of my child tax credit was phased out that year.

3) If you have college age kids the taxable relocation income could show up on the financial aid applications.

4) In my Social Security earning history the year I relocated shows significantly higher earnings for that year because of the relocation expenses. It is probably trivial but that will give me a bit higher social security retirement check. You could also get to the point where you are above the maximum amount of income that is taxed by Social Security in 2019.

I don't recall but I don't think the taxable moving costs were included for my 401k employer match. For example I had a match of 50% of the first 6% of my income. I think that was without the moving costs even though they were taxable.

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Re: Employer paid moving expenses, tax deductible?

Post by RickBoglehead » Sun Feb 10, 2019 1:20 pm

Under the old tax law, the employer would gross up the taxes and put the expenses as income. The employee could not deduct the expenses, and the higher income resulted in more taxes that were grossed up, so the employee came out whole. I'm trying to understand what's changed. You could never deduct expenses that you received compensation for...

My employer agree to gross up for my last move (2007). They did it wrong, both the calc and not using my tax bracket. I ultimately got them to agree to do the calc the right way AND use my tax brackets. The company controller had no clue, CEO had to sign off on it.
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Re: Employer paid moving expenses, tax deductible?

Post by TomatoTomahto » Sun Feb 10, 2019 1:23 pm

corn18 wrote:
Sun Feb 10, 2019 12:41 pm
Epsilon Delta wrote:
Sun Feb 10, 2019 12:30 pm
Gill wrote:
Sun Feb 10, 2019 12:07 pm
I don't know how a company could consider the tax bracket of every employee in their gross up policy.
gill
They could ask for the tax returns and run pro-forma numbers. (Or have a discreet accountant trusted by both sides work the numbers.)
Agree. It really isn't that hard. Especially at my level. Just ask me, I'll be glad to tell you and provide documentation. Or just use my company payroll info. The company W-2 alone puts me well into the 37% tax bracket, so it isn't really rocket science.

I'm not asking them to gross up beyond what my company salary requires. If my company pay put me in the 22% tax bracket and I had a side gig or something pushing me into the 37% bracket, I wouldn't ask my company to gross up to 37%. But my company pay puts me into the 37% bracket all by itself, so gross it up to 37%.
What would you suggest if a low pay employee moved for the benefit of an employer, but whose spouse was in the highest bracket? Or, if one of them had income timing options available to them? It gets silly after a while.

We are in the highest bracket. Our “gross up” was according to IRS rules. IMO, a first world problem.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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corn18
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Re: Employer paid moving expenses, tax deductible?

Post by corn18 » Sun Feb 10, 2019 2:09 pm

TomatoTomahto wrote:
Sun Feb 10, 2019 1:23 pm
corn18 wrote:
Sun Feb 10, 2019 12:41 pm
Epsilon Delta wrote:
Sun Feb 10, 2019 12:30 pm
Gill wrote:
Sun Feb 10, 2019 12:07 pm
I don't know how a company could consider the tax bracket of every employee in their gross up policy.
gill
They could ask for the tax returns and run pro-forma numbers. (Or have a discreet accountant trusted by both sides work the numbers.)
Agree. It really isn't that hard. Especially at my level. Just ask me, I'll be glad to tell you and provide documentation. Or just use my company payroll info. The company W-2 alone puts me well into the 37% tax bracket, so it isn't really rocket science.

I'm not asking them to gross up beyond what my company salary requires. If my company pay put me in the 22% tax bracket and I had a side gig or something pushing me into the 37% bracket, I wouldn't ask my company to gross up to 37%. But my company pay puts me into the 37% bracket all by itself, so gross it up to 37%.
What would you suggest if a low pay employee moved for the benefit of an employer, but whose spouse was in the highest bracket? Or, if one of them had income timing options available to them? It gets silly after a while.

We are in the highest bracket. Our “gross up” was according to IRS rules. IMO, a first world problem.
Not arguing the first world problem aspect of it. That’s a given when you’re talking about half million dollar annual incomes.
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Re: Employer paid moving expenses, tax deductible?

Post by cherijoh » Sun Feb 10, 2019 2:19 pm

Gill wrote:
Sun Feb 10, 2019 12:07 pm
corn18 wrote:
Sun Feb 10, 2019 11:56 am
We moved in 2018 and the company paid all expenses. They did gross up my pay and reported that on my W-2, so I do not have to report those on my return, I don't think, because it shows up as W-2 income.

I was a bit irritated with my company's gross up policy. They use the IRS rules and gross up federal @ 22%. But I am in the 37% tax bracket, so I take a tax hit at my marginal rate. Had a chat with them about that and got nowhere. It's a $100k package and we used all of it, so that costs me $15k in extra taxes.
I don't know how a company could consider the tax bracket of every employee in their gross up policy.
gill
Right. They could potentially consider the marginal tax bracket for their employee with no additional income but that would be as far as it goes. There is no way to consider investment income, a working spouse etc.

IMO
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Re: Employer paid moving expenses, tax deductible?

Post by IMO » Sun Feb 10, 2019 2:38 pm

I believe it's all here:

https://www.irs.gov/publications/p521

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Re: Employer paid moving expenses, tax deductible?

Post by dodecahedron » Sun Feb 10, 2019 2:54 pm

IMO wrote:
Sun Feb 10, 2019 2:38 pm
I believe it's all here:

https://www.irs.gov/publications/p521
No it is not ¨all here." The link above goes to the rules for the 2017 tax year. Pub 521 has not yet been updated for 2018 and the link above has seriously out of date information.

TCJA changed many tax issues quite a bit, including the treatment of moving expenses. Moving expenses are no longer deductible nor can employer reimbursed expenses be excluded from income subject to taxation EXCEPT for members of the armed forces who meet certain other requirements.

The most up-to-date information authoritatively from the IRS is available on the Form 3903 page here.

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Re: Employer paid moving expenses, tax deductible?

Post by dodecahedron » Sun Feb 10, 2019 3:14 pm

retiredjg wrote:
Sun Feb 10, 2019 10:49 am
Not sure if this is the same situation, but when my employer moved me, they paid the costs, I had to report those costs as income, then I deducted the moving expense on my taxes. It was pretty much a wash in the end.
That was the way it used to be for everyone. But under current law (TCJA), as of tax year 2018 only members of the Armed Forces are potentially eligible to exclude moving expenses from income subject to taxation.

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Re: Employer paid moving expenses, tax deductible?

Post by nolesrule » Sun Feb 10, 2019 3:33 pm

Watty wrote:
Sun Feb 10, 2019 1:01 pm

1) The relocation expenses could make you a "Highly compensated employee(HCE)" which can limit how much you can contribute to a 401k.
This happened to my wife with her (our) corporate relocation. And the 401k cap did prevent her from contributing the full amount the next year. Fortunately by the next year she was earning enough as HCE the old fashioned way that the cap still allowed her to contribute the max.

Additionally, they grossed up so taxes were at 25%, which was fine, but then at the end of the year did a gross up adjustment so that the final amount of taxes withheld conformed to her W-4.

These days, our marginal bracket is one bracket higher than the marginal bracket based on our W-4 settings, we're subject to Additional Medicare tax and NIIT. I already assume 100% NIIT in our additional withholding). We're also looking at the possibility of a relocation this summer, and this gives me some new numbers to crunch that i hadn't thought about. Whatever the cost of the relocation, we'll probably need to assume we'll have to pay taxes out of pocket on 3.9% of the relocation costs. I don't think we'd get bumped into the next bracket.

And the state tax situation.... :oops:

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Re: Employer paid moving expenses, tax deductible?

Post by Gill » Sun Feb 10, 2019 3:53 pm

Epsilon Delta wrote:
Sun Feb 10, 2019 12:30 pm
Gill wrote:
Sun Feb 10, 2019 12:07 pm
I don't know how a company could consider the tax bracket of every employee in their gross up policy.
gill
They could ask for the tax returns and run pro-forma numbers. (Or have a discreet accountant trusted by both sides work the numbers.)
Yes, of course, but I meant as a practical matter dealing with a number of employees it seems they'd somehow have to use a blended rate.
Gill
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simas
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Re: Employer paid moving expenses, tax deductible?

Post by simas » Sun Feb 10, 2019 4:22 pm

yes, very much first world problem - each of those moving transactions entered voluntarily, under assumption of significant benefit to employee (continued employment being the most, career prospects, immediate/delayed comp adjustments, etc. ). person always has a choice of doing it or not going it, continuing to work under arrangement or moving elsewhere, with/without at will employment (if contract exists, that employment agreement similarly spells out how parties get out of it).

so take the gross up, say thank you, remember that it was your decision to move ahead with it, and move on..

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theRemedy
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Re: Employer paid moving expenses, tax deductible?

Post by theRemedy » Sun Feb 10, 2019 4:43 pm

HueyLD wrote:
Sun Feb 10, 2019 10:14 am
theRemedy wrote:
Sun Feb 10, 2019 1:46 am
Hi All,

Firs time posting here. I moved from South Carolina to Washington State with the same employer. My employer has a generous relocation package and covered all expenses; shipping home goods, vehicles, flights for the family, and temporary lodging and expenses. All the expenses were paid directly by my employer and were reported on my W2 as income (box 1), my employer also paid estimated income tax for me on these expenses. I'm just starting to look into the rules for relocation expenses to see how to report on my taxes, so any help is appreciated. I was given a statement with a breakdown of all expenses paid. My question is, are all these expenses just treated as ordinary income for me? Meaning, I do not get to claim any deductions for these expenses?

Thanks!
Did you by any chance move in 2017 but reimbursement did not arrive until 2018?

If both happened in 2018, you will pay taxes on the reimbursements and none of which is deductible.

https://www.irs.gov/newsroom/tax-reform ... g-expenses
My move happened in 2018.

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theRemedy
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Re: Employer paid moving expenses, tax deductible?

Post by theRemedy » Sun Feb 10, 2019 4:48 pm

TomatoTomahto wrote:
Sun Feb 10, 2019 11:21 am
retiredjg wrote:
Sun Feb 10, 2019 11:08 am
Oh dear. This is not good. :(
It happened to us, but employer was kind enough to “gross up” the withholding, so we are essentially square on the reimbursement. There were caps on reimbursement, so it wasn’t a “free” move, but pretty fair.
My employer did gross up and looks like at a rate of 30%, so that should take care of my taxes. From everyone’s reply sounds like with the recent tax law changes I just report this as ordinary income and move on. Thanks all for the information!

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