The income tax provisions in the Tax Cuts and Jobs Act (TCJA) affecting individual taxpayers are temporary and, without further action by Congress and the “in-office” President, will revert to prior law provisions in calendar 2026. One of the many temporary provisions was one modifying the rules for the tax treatment of qualified moving expenses.
For tax years 2018–2025, the TCJA suspends the income exclusion for qualified moving expense reimbursements, except for certain active-duty members of the U.S. Armed Forces.
The Internal Revenue Service recently clarified that reimbursements an employer pays to an employee in 2018 for qualified moving expenses incurred in a prior year (2017, for example) are not subject to federal income or employment taxes. The same outcome applies for payments made directly by an employer to a moving company.
Note that to qualify, the reimbursements or payments must have been incurred for work-related moving expenses that would have been deductible had the employee directly paid them prior to January 1, 2018.
The guidance further notes that employers that have already treated moving expense reimbursements or payments applicable to years beginning before January 1, 2018 as taxable income may follow the normal employment tax adjustment and refund procedures.
The changes related to qualified moving expense reimbursements were intended to add a level of simplification to the Internal Revenue Code but represent a profound change in the treatment of these payments.
Should you have questions or comments, please contact Bob Grossman or Don Johnston.
