Revised Publication 521 Explains Limited Moving Expense Deduction and Exclusion for 2018

The IRS has substantially revised Publication 521 (Moving Expenses) to reflect limitations on the moving expense deduction and the exclusion for moving expense reimbursements imposed by the Tax Cuts and Jobs Act. Those limitations suspended the deduction and exclusion for an eight-year period beginning in 2018, except for (1) members of the Armed Forces on active duty who move because of a permanent change of station and (2) certain moves by servicemembers’ spouses and dependents (see our Checkpoint article).

The 2018 version of Publication 521 eliminates material applicable only to moves by other employees, and moves into the main discussion information for members of the Armed Forces that previously appeared in a special section at the back. Discussions of the time and distance tests have been deleted, as have all references to the requirement that an employee’s move be closely related to the start of work. (Different rules apply to members of the Armed Forces and their families.) The publication’s description of deductible and non-deductible expenses—which, as a result, may or may not be reimbursed on a tax-free basis—is largely unchanged, but the examples have been revised to apply to servicemembers. The standard mileage rate used to calculate the moving expense deduction has been updated (see our Checkpoint article). And revisions to the section on reporting moving expense deductions, including the detailed example, conform to changes in Form 3903 (Moving Expenses) and Form 1040 for 2018 (see our Checkpoint article).

EBIA Comment: Most employers and employees will have little need to consult this publication during the suspension period. But the changes offer a reminder that during the suspension there is no tax reason for affected employers to limit moving expense reimbursements to moves that pass the time and distance tests and satisfy the start-of-work requirement. All employer reimbursements will be taxable whether or not those tests are met. This gives employers greater freedom to customize reimbursement policies, but some employers may decline the opportunity because the pre-2018 limitations serve as convenient boundaries, and maintaining those boundaries during the suspension period may facilitate compliance when the deduction and exclusion return in 2026 (absent further legislative action). For more information on employer-provided moving expense benefits, see EBIA’s Fringe Benefits manual at Section XVII (“Moving Expense Benefits”).

Contributing Editors: EBIA Staff.