The IRS Clarifies Taxability of Moving Expenses Incurred Prior to 2018

Today, September 21, the IRS announced that they have decided to allow the exclusion of moving expenses paid in 2018 if they were incurred in 2017. There was uncertainty as to how the IRS would decide to treat these expenses. Normally, expenses are considered taxable in the year paid but per IRS Notice 2018-75, if the 2018 payment was for moving expenses incurred prior to 2018, then the employer can exclude these amounts from the employee’s earnings.

Meanwhile, moving expenses for qualified military moves will continue to be excludable regardless of the year incurred.

As a reminder, in December 2017, The Tax Cuts and Jobs Act was passed. As a result, moving expenses that had been excludable/deductible for years would no longer be allowed as excludable/deductible starting in 2018, with the exception of qualified military moves. As it stands today, this is a temporary change and the rules will revert back to pre-2018 laws starting in 2026.

For more information, please see the official IRS announcement.