ISSUE:

Generally, the historical exclusion from income for reimbursed or paid-by-employer moving expenses is suspended through 2025.

 

 

SITUATION:

Marathon Bible College (MBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

MBC’s CFO called us to ask about their policy of paying for and/or reimbursing moving expenses.  Because they are located in the Florida Keys, many of their new hires have to move a great distance – at great cost.

Our answer is that, beginning January 1, 2018 (through December 31, 2025) the new tax law makes any payment for or reimbursement of moving expenses taxable income to the employee.

Institutions should be careful about promises made to current, new, and future employees with regard to moving expenses. Also, any policies and procedures based on the suspended provisions should be updated to conform with current tax law.

 

RULES:

Sections 11048 and 11049 of the new law suspend the exclusion from income tax for qualified moving expense reimbursements AND the deduction for moving expenses through December 31, 2025 (except in the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military – I.R.C. section 217(g))).

Thus, IRC section 217 has been amended by adding the following new subsection at the end:

(k) Suspension of deduction for taxable years 2018 through 2025.

Except in the case of an individual to whom subsection (g) applies, this section shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.

 

BOTTOM LINE:

  • Historically, moving expenses (paid or reimbursed) were not taxable to the employee.
  • If certain criteria were met, unreimbursed moving expenses could be deducted by the employee on Form 3903 – no longer.
  • Schools should review their policies, procedures, and offer letters to update these for the tax changes.
  • Clear communication with recruits and employees is needed.

 

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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