Legislation Introduced to Provide Tax Break to Some Federal Employees

Recently introduced legislation would prevent certain federal employees from having to pay additional income taxes on relocation expenses.

Legislation was recently introduced that would prevent a small subset of federal employees from having additional taxes on their reimbursable moving expenses.

Background

The new tax law eliminated the deduction for job-related moving costs as well as the exclusion for reimbursements or in-kind contributions made by employers to defray the cost of moving. As a result, employer reimbursements for moving costs became taxed at the same rate as ordinary income.

Some lawmakers in Congress that represented districts home to many federal workers were concerned about the potentially higher than expected tax bills. They sent a letter to the General Services Administration to expedite its efforts to remedy the situation.

The GSA clarified its rules so that agencies can now reimburse roughly 95% of the affected federal workers for this additional cost.

However, there are approximately another 25,000 federal workers who receive moving reimbursements, generally new and retiring employees, who are still not eligible. Examples include teachers working for the Defense Department who teach children of military families worldwide or new employees likely to be transferred after being hired at agencies such as the Federal Bureau of Investigation.

The Relocation Expense Parity Act

Enter the Relocation Expense Parity Act (S. 3236). It was introduced by Senator Mark Warner (D-VA) and would make any federal employee eligible for having moving costs paid also eligible for reimbursement for the additional taxes.

“Civilian federal workers uproot their entire lives and move to distant locations in service to their country. They shouldn’t have to pay a price for their commitment to public service,” said Sen. Warner. “This bipartisan legislation closes a remaining gap that prevents all federal employees from being fairly compensated for their willingness to serve our country.”

Several federal employee advocacy groups have expressed their support of the bill including the FBI Agents Association and National Active and Retired Federal Employees Association (NARFE).

About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.

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