Tax Reform and Employee Relocation | NRI Relocation
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Tax Reform and Employee Relocation

Tax Reform

04 Jan Tax Reform and Employee Relocation

Tax Reform

We begin this New Year with Tax Reform changes that will impact employee relocation. The vote we were waiting for has finally happened and was signed into law just before the holidays. The new law will necessitate immediate changes to most relocation policies.

Moving Expense Deduction
The first, and most obvious, change that you need to address in your Employee Relocation Policy is the elimination of the Moving Expense Deduction. The shipment of household goods, storage, and the family’s final move to the new location are now considered taxable income. If your company currently grosses-up taxable relocation expenses, you will likely decide to gross-up these expenses too.

The following chart is an example of the additional tax gross-up on the shipment of Household Goods:

HHG Cost
Tax Assistance
$5,000
$3,000
$10,000
$6,000
$15,000
$9,000
$20,000
$12,000

So, while your C-Suite is busy deciding how to invest the likely significant tax savings resulting from the reduction in the corporate tax rate from 35% to 21%, be sure to let them know that relocation budgets will increase by the amount of the estimated gross-up. Recruiting, retention and engagement are challenging enough – the financial tax burden shouldn’t be absorbed by your coveted talent!

State And Local Tax (SALT) Deduction
A key hidden impact on relocation will be the elimination of the SALT (State And Local Tax) deduction from federal taxes. SALT and 1st/2nd home property taxes combined will be limited to $10,000. This can impact your transferring employees – some for the worse – and some for the better. Depending on where your employees are moving from, they will either enjoy a more affordable cost of living or they may resist the relocation due to the limitations on SALT and property taxes.

SALT Leaders
The Tax Foundation interprets individual tax burden by what taxpayers actually spend in local and state taxes, rather than report these expenses from the state revenue perspective used by the Census Bureau. According to the foundation, the five highest state-local tax states were:
  • New York 12.7 %
  • Connecticut 12.6%
  • New Jersey 12.2%
  • Illinois 11.0%
  • California and Wisconsin 11.0%

Property tax falls under local, not state, jurisdiction. The most expensive property tax counties in terms of percent of income, according to the Tax Foundation’s analysis of the U.S. Census Bureau’s 2009 American Community Survey were:
  • Passaic County, New Jersey 8.79%
  • Essex County, New Jersey 8.27%
  • Union County, New Jersey 8.13%

These Louisiana parishes hold the least expensive spots for property tax as a percent of income:
  • Grant Parish 0.26%
  • Assumption Parish 0.26%
  • Vernon Parish 0.25%

Because of these variances, employees may request a Cost of Living Analysis due to their personal circumstance. NRI can provide these reports to you as needed.
 
Summary
2018 will be an interesting and exciting year for corporations moving and recruiting new employees! NRI Relocation will be in touch with our customers early in the year to discuss the tax changes and the impact on their Relocation Policy. We are here to advise you and to update your existing policies. As always, our goal is to keep the administration of relocation less “taxing” on you!

Please call us at 800-598-8887 if you need immediate assistance with your policies.
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