The passage of the Tax Cuts and Jobs Act in December 2017 implements several changes that will affect University employees and departments. Section 11048 of the H.R. 1, Suspension of Exclusion for Qualified Moving Expense Reimbursement, is the suspension of excluding moving expenses from employee taxable income. This suspension runs from January 1, 2018 to December 31, 2025. Due to this change in the federal law, moving expenses incurred by employees during calendar years 2018-2025, will be treated as wages and processed through the Payroll Department and subject to federal, state and FICA tax withholding. Please note, that HR 1, section 11049 also suspends the employee’s allowance of the moving expense deduction for the same period.
Effective January 1, 2018, all personal moving expenses related to reimbursements to the employee or payments paid directly on behalf of employees are taxable and includable in the employee’s income. Furthermore, these payments are taxable without regard to whether receipts and/or appropriate documentation are provided by the employee.
Departments must now receive authorization from administrative official with delegated authority who may approve a lump sum moving allowance when necessary to recruit new employees. (see POL 05.15.03 Non-Salary and Deferred Compensation, section 4.1.2) Once approval has been given for specific amount of allowance, department will enter a job action into the PeopleSoft HR system to alert Payroll of additional income. Beginning July 1, 2018, Payroll will process moving expenses and include them in wage income and subject to federal and state income tax and FICA withholding. Departments will need to ensure that future employee’s understand that any allowance provided for relocation costs will be included in their taxable income.
However, NCSU may continue to reimburse on a tax-free basis those moving expenses incurred and paid by employees during calendar year 2017. For moving and relocation expenses incurred prior to December 31, 2017, and already paid by the employee who is now seeking reimbursement, they may reimbursed tax-free. Expenses paid by the University directly to a moving company or third-party are includable in the employee’s wages.
Non-Taxable expenses (incurred and paid in 2017 by employee and now seeking reimbursement):
- Moving household goods, personal effects, shipping of your car (including in-transit or foreign-move storage expenses).
- Storage cost (30) consecutive days after personal items have been moved from the former residence.
- Mileage 17¢ (2017). Mileage over the rate established by the IRS, on a yearly basis, is not deductible.
- Parking fees and tolls related to move
- Lodging one day before the move and one day after the individual arrives at their new location. Lodging occurred in route from one state to the new location may be considered as a deductible expense
- Traveling expenses are only deductible for one trip the previous location to the new location.
- Truck rental (to move personal goods)
- Cost of connecting or disconnecting utilities required to move.
- Shipping of family pets from the former residence to the new residence
Taxable Expenses (Includable in Employee’s wages prior to tax act and includable now)
- Temporary housing
- Any expenses associated with house hunting i.e. travel (air, train, or bus) car rental, mileage, lodging, parking fees or tolls
- Mileage over the allowable rate set yearly by the IRS
- Lodging over the allowable days or not in transit
- Return trips to your former residence
- General repairs, maintenance, insurance of depreciation for your car, new home or former home
- Any part of the purchase price of your new home.
The University Controller’s Office, Human Resources and General Counsel will be working to update policies and procedures in relation to these legislative changes.
Legislative Links to new law
University Links (Will be updated accordingly)