Tax reforms in 2018 will have an impact on deductions and property taxes. Here is a brief summary of the primary changes. Please note that individuals should always consult their tax advisors.
Moving Expense Deduction
As of January 1, 2018, movement of household goods, storage and final move travel are taxable to transferees. With the elimination of the moving expense deduction, the "50 mile", "39 week" and "one year" rules as well as the 18 cents per mile vehicle allowance are no longer relevant. This change should be reviewed closely with your mobility management company to fully understand the impact to your organization.
Tax Rates and Withholding
The tax rates are generally lowered, which should reduce the marginal tax rate for employees. The supplemental withholding rate that is used by most companies to withhold on taxable relocation benefits and to calculate gross-up will fall from 25% to 22%. However, with the loss of moving expenses and other deductions, companies will need to manage their gross-up programs carefully, especially with the new tax rates.
State and Local Income, Sales and Property Taxes
State and local income, sales and property taxes remain deductible, but only up to $10,000 combined. Employees moving into high-tax areas are more likely to be affected.
Mortgage Interest Deduction
The mortgage interest deduction is retained, but the maximum loan amount to be able to deduct was reduced from $1 M to $750,000. Employees moving into high-cost areas are more likely to be impacted by this new threshold for mortgage interest deductions.
Home Sale Capital Gains Exclusion
There were no changes here. Both the House and Senate had proposed changing the required ownership and use as a principal residence to five out of eight years from the current two out of five. That would have certainly impacted relocation with many transferees moving again inside of a five-year window, but fortunately there were no changes regarding Capital Gains on homes.
Tax Brackets and Rates, 2018
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Although this written communication may address tax issues, it is not a covered opinion as described in Circular 230. Therefore, to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments), unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.
CapRelo is a global mobility and relocation management company offering flexible and custom relocation programs for corporate, government, and international clients. CapRelo manages over 10,000 worldwide relocations and assignments annually for major companies across the world, while maintaining a 99% client satisfaction rating. With over 21 years of mobility expertise, CapRelo is positioned to help companies deliver seamless relocation programs through their experienced team and cutting-edge technology.
