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Do you have current or new employees that you plan to reimburse for moving expenses? In the past, these payments were excluded from income and treated as a non-taxable for the employees provided they were reimbursed under an accountable plan and the relocation met the distance requirements.

With the new Tax Cuts and Jobs Act, the exclusion from income for moving expenses reimbursed or paid by an employer starting in 2018 and through Dec. 31, 2025 was suspended. This means those payments are now taxable to the employee as compensation. This provision does not apply to active-duty members of US Armed Forces who are required to move due to a permanent change of station.

When looking to relocate employees, know that the expense reimbursement may have an added cost. Employers will be required pay and withhold social security and Medicare taxes now that the reimbursement is deemed a taxable benefit.

To avoid confusion, you will want to let your employees know this is a taxable benefit to them prior to reimbursing them for relocating. What was once seen as an additional incentive to encourage employees to make a switch, may now become an unintended detriment and discourage those employees from leaving their current location. For help navigating this change and the many others in the Tax Cuts and Jobs Act, contact us in one of our many locations today.