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TCJA Update: U.S. moving expense changes for non-conform states

August 29, 2018 11:25:27 AM EDT | By: Jacqueline Briggs

The Tax Cuts and Jobs Act (TCJA) went into effect on January 1, 2018. The new federal law changed moving expenses, including household good, auto moves and storage, from tax deductible expenses to non-deductible expenses. 

While many states adopted this change, it has presented challenges to states that do not automatically conform to federal tax regulations. Specifically, without action by these states, moving expenses remain excludable for state income tax purposes even though they are now taxable for federal income tax purposes.

Most – but not all – of the states that do not automatically conform to federal tax regulations have addressed this in their state legislatures. As the end of the year and a busy payroll season draw near, it’s important to understand the status of the taxability of moving expenses in the affected states.

  • The states that do not conform to TCJA and will continue to allow the exclusion of moving expenses for tax year 2018 include: Arizona, Arkansas, Hawaii, Kentucky, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania and Virginia.
  • Iowa will allow the exclusion for tax year 2018. Beginning in tax year 2019, they will conform to the federal tax regulations and treat moving expenses as taxable wages.
  • California, Maine and South Carolina still must decide on the tax treatment of moving expenses for tax year 2018. If they do not decide by the close of the tax year, the moving expense will remain excludable from state taxable income.
  • All other states with a personal income tax conform to the change within TCJA that does not allow for the exclusion of moving expenses from taxable wages.

For states that have not yet made a final decision, mobility providers can continue to treat them as non-taxable, or shift to the current federal regulations and provide an adjustment at the end of the taxable year to recapture any taxes paid to the state authority on amounts that are eligible to be treated as excludable in that state.

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Topics: tax cut and job act, TCJA, global mobility tax, tax deductible expenses

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