Tax Topics for Small Business Week – Moving Expenses

The 2018 Small Business Week started April 29, 2018 and runs through May 5, 2018. This annual event, hosted by the U.S. Small Business Administration, is the celebration of the contributions by entrepreneurs and small business owners.

I wanted to continue my series of posts related to the 2018 Small Business Week with some information about moving expenses. Before the Tax Cuts and Jobs Act (TCJA) an individual could deduct reasonable moving expenses if they met certain rules. In addition, an employer could reimburse their employees for the moving expenses and the reimbursement wouldn’t be taxable. I have clients that used this reimbursement as a recruiting tool for their top qualified job applicants but now this treatment is not available.

The TCJA repealed the exclusion of the qualified moving expense reimbursements from an employee’s income for the tax years after December 31, 2017 through December 31, 2025. This means for 2018 through 2025 the reimbursements will be added to the employee’s taxable income.

When I have talked with my clients, we’ve discussed ways to mitigate this change, such as grossing up the reimbursement through an additional signing bonus so that the company ends up paying the tax. I’ve also had discussions about whether the relocation is actually required, when in fact the potential employee could work from their current location in a remote capacity.

This topic hasn’t received a lot of coverage in the press so small businesses who use this recruiting tool might not be aware of it. I hope you’ll take a closer look at your recruiting tools to make sure you are not surprised based on the tax law changes under the Tax Cuts and Jobs Act. This is another issue where you’ll get the best answer if you discuss the tax treatment and alternatives with a tax professional to avoid unintended consequences.