IRS Now Allows Tax-Free Payment of Moving Expenses

Good news for employees with moving expenses!

Last year’s tax reform law, the Tax Cuts and Jobs Act (Act), eliminated the rules allowing individuals to exclude from taxable income amounts an employer pays for some job-related moving expenses, except for certain active-duty members of the armed forces. Additionally, job-related moving expenses paid for by the individual and reimbursed by an employer are taxable. This change applies for tax years 2018 through 2025. (The Act terminates by its terms after 2025, assuming there is no extension.)

The IRS has now indicated an employer can directly pay or reimburse an employee’s qualified moving expenses in 2018 if the expenses were incurred prior to Jan. 1, 2018. In other words, in determining whether employer-paid moving expenses are nontaxable, the IRS will look to the date the expenses are incurred, not when the amounts are paid or reimbursed by the employer.

What were the rules prior to 2018?

Prior to the change made by the Act, an employer could pay or reimburse tax-free an employee’s qualified moving expenses. No dollar limits applied to the amount of moving expenses that could be reimbursed tax-free (subject to the amounts being reasonable), no nondiscrimination rules applied under the tax code and the moving expense program was not subject to ERISA.

Lockton comment: Any amounts not paid or reimbursed by the employer could be deducted when the employee filed his federal tax return. IRS Publication 521 provides the details on the parameters of tax-qualified moving expenses incurred before Jan. 1, 2018.

Qualified expenses were those incurred for moving household goods and personal effects to a new residence, including related travel expenses but not meals. For moves outside the US (foreign moves), qualified expenses include moving personal effects in and out of storage.

For employment-related moves, the employee’s new workplace had to be at least 50 miles farther from their former home than the old job location was from the former home. If there was no previous workplace, the new job location must have been at least 50 miles from their old home.

Example: Joe moved to new home less than 50 miles from his former home because he changed employers. Joe’s old job location was 3 miles from his former home. Joe’s new job location is 60 miles from that home. Because his new job location is 57 miles farther from his former home than the distance from his former home to his previous job location, Joe meets this distance test and could have been reimbursed tax-free for his moving expenses, assuming he meets other requirements spelled out in IRS Publication 521.

New tax law changes the rules

The Act disallowed the tax-favored treatment of moving expenses beginning in 2018. However, the law was not clear whether the change applied based on when the moving expenses were incurred by the employee or paid (or reimbursed) by an employer. Based on the new IRS guidance, both of the following would be tax-free to the employee:

  • An employer directly pays a third-party moving service after Dec. 31, 2017, for moving services provided to an individual prior to Jan. 1, 2018.
  • An employer reimburses an individual after Dec. 31, 2017, for expenses incurred in connection with a move by the individual prior to Jan. 1, 2018.

If an employer treated the payments or reimbursements noted above as taxable to the employee and withheld taxes, it can use the IRS-sanctioned adjustment process or refund claims process to correct the overpayment. The employer will want to make any such corrections prior to the issuance of the employee’s W-2 in early 2019.

If you happen to be moving to the Denver area and are in need of a real estate agent, feel free to contact me directly The Colorado Broker

Winterize Your Home Before it Gets Too Cold

Winter’s Coming: Time to Prepare

There’s a chill in the air and, along with it, that nagging feeling that home maintenance chores await. While it’s tempting to procrastinate, now is the time to attend to your home, winterizing before the cold sets in.

Your to-do list should include these duties:

Clean gutters: Now is the time to remove leaves and other debris that have fallen into your gutters. This will help ensure good drainage after snowstorms, when melting occurs.

Clean the chimney: If you haven’t done recently, hire a professional to rout out soot, creosote and other dangerous elements that accumulate on the inside of the chimney. It’s also advisable to place a screen on top of the chimney to keep out rodents and other creatures.

Have your furnace inspected: It’s important to have an HVAC professional check the furnace for any malfunctions. Also, be sure to change the filters and keep new ones handy for monthly replacement during the winter months.

Be sure you know where your water main is located. This will speed your reaction time in the case of freezing pipes and other emergencies. Also, drain garden hoses and put them in storage for the winter.

Check the foundation around the house: Clear away any debris and vegetation from the house’s foundation so that you can spot any cracks or entry holes. If you find some, be sure to seal them off to keep animals from entering your home as the cold sets in.

Caulk gaps in siding, windows or doors: This will keep the cold wind from blowing through your living room—and help you save on energy bills.

Homeowners in Denver required to pay for sidewalk repairs

Homeowners Required to Pay for Sidewalk Repairs

In some parts of Denver, a stroll down a leafy block can be one part scenic, one part obstacle course. With so many sidewalks in terrible disrepair, a wrong step can send someone tumbling.

As a result, the city has turned to a rule that has long been on the books but rarely enforced—one that makes Denver homeowners responsible for keeping the sidewalks near their properties well-maintained and, if necessary, repairing them at their own cost.

Since summer, officials have begun sending city workers out to inspect sidewalks and to notify homeowners of their duties to repair any gaps, cracks or other deficiencies that could interfere with the ease of walking down a street.

“We’re a growing city and we’re trying to give people other options to get around town,” Denver Public Works spokeswoman Nancy Kuhn told CBS4. “This program is addressing those hazardous sidewalks and making it easier to get around.”

Most repairs will cost less than $1,000, notes CBS4. Homeowners are required to fix sidewalks within 45 days of receiving notice. If the job doesn’t get done in that timeframe, the city will fix it—and bill the homeowner.

This year, the Neighborhood Sidewalk Program is focusing on central Denver, with other regions to get attention in following years.

If you’ve received notice that your sidewalk is in disrepair, don’t choose someone to fix it randomly. Call us for referrals and we’ll happily guide you to trusted professionals.