Minnesota Conforms to Tax Reform; Moving Expenses Only Deductible in 7 States

7.15.19 | Minnesota has passed legislation to follow federal tax laws put into place by the Tax Cuts and Jobs Act (TCJA), which means moving expenses will no longer be deductible with the exception of military moves. The new law is retroactive to 2018 so Minnesotans may need to amend last year’s tax returns.

The following seven states still allow the exclusion in 2019:

  • Arkansas
  • California
  • Hawaii
  • Massachusetts
  • New Jersey
  • New York
  • Pennsylvania

The Minnesota law does make an exception for non-reimbursed travel expenses that are employment-related. These costs are deductible up to 2% of an individual’s adjusted gross income.

The Minnesota law is designed to produce “net zero” spending, which means that revenues raised by conforming to the TCJA are offset by tax relief or higher spending on tax aids and credits. It’s estimated to reduce revenue from individual taxes by more than $530 million. This is mostly accomplished by raising taxes on businesses and lowering them for individuals.

Our Advice

Companies who have Minnesota-related relocations should reassess their approach to grossing up reimbursements for moving expenses for 2019 and beyond. Additionally, they may consider retroactive gross-ups for 2018.

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