Tax Reform Passes – What It Means for Relocation & Beyond

The biggest change affecting our industry is the elimination of the exclusion/deduction for moving expenses such as the shipment of household goods, storage, and final move costs except for military moves. For companies that gross up for taxable reimbursements, this will mean several thousand dollars more in gross-up per transferee.

Some of the changes are temporary through 2025 and would return to current laws barring any further legislation being passed. Below is a breakdown of some of the changes comparing this year with next year:

  • Moving Expense Deduction (most shipment, storage, and final move costs)
    • 2017: Excludable/deductible for qualified moves
    • 2018: The exclusion/deduction is eliminated except for military moves
  • Federal Tax Brackets & Rates
    • 2017: Seven brackets with top rate of 39.6%
    • 2018: Seven brackets but with some lower rates, including a new top rate of 37%
  • Supplemental Withholding Rate
    • 2017: 25%, and 39.6% if supplemental income exceeds $1,000,000
    • 2018: 22%, and 37% if supplemental income exceeds $1,000,000
  • Standard Deduction Amounts
    • 2017: $12,700 if MFJ, $6,350 if SNG or MFS, and $9,350 if HH
    • 2018: $24,000 if MFJ, $12,000 if SNG or MFS, and $18,000 if HH
  • Mortgage Interest Deduction
    • 2017: Deductible with cap of $1,000,000
    • 2018: Deductible with cap of $750,000, but includes a transition rule exception
  • State/Local Income/Sales Tax and Property Tax
    • 2017: Deductible
    • 2018: Deductible up to $10,000
  • Exemption Deduction
    • 2017: $4,050 deduction per exemption
    • 2018: Exemption deduction is eliminated
  • Child Tax Credit
    • 2017: $1,000 per dependent child under 17 but subject to phaseout if AGI exceeds $110,000 if MFJ, $75,000 if SNG or HH, and $55,000 if MFS
    • 2018: $2,000 per dependent child under 17 but subject to phaseout if AGI exceeds $400,000 if MFJ and $200,000 for others
  • Other Dependent Credit
    • 2017: Not available
    • 2018: $500 per other eligible dependents
  • Itemized Deduction Phaseout
    • 2017: Deduction phases out for higher incomes
    • 2018: Phaseout is eliminated
  • Medical Expense Deduction
    • 2017: Deductible for expenses exceeding 7.5% of AGI (it was going to be 10%, but the new law retroactively lowers it to 7.5%)
    • 2018: Deductible for expenses exceeding 7.5% of AGI, but returns to 10% in 2019
  • Gain on Sale of Home
    • 2017: Can exclude gain of up to $500,000 if MFJ / $250,000 if SNG if primary residence for at least 2 of previous 5 years (with exceptions)
    • 2018: No change to rule, despite indications it might increase to 5 of previous 8 years
  • Individual Alternative Minimum Tax
    • 2017: Some taxpayers subject to AMT
    • 2018: Retained, but with higher exemption amounts
  • Health Care Mandate
    • 2017: Requires all to have insurance or pay a fine/tax
    • 2018: Mandate is eliminated
  • Corporate Tax Rates
    • 2017: Top tax rate of 35%
    • 2018: Top tax rate of 21%

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