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Legislation Reintroduced to Provide Tax Break to Some Federal Employees

Another effort is being made to provide a tax break to some federal employees who are reimbursed by the government for their relocation costs.

Legislation has been reintroduced in the Senate that would prevent a small subset of federal employees from having additional taxes on their reimbursable moving expenses.

The Relocation Expense Parity Act (S. 841) would ensure that all federal employees who qualify to have their moving costs reimbursed by the government are also repaid for the taxes owed on relocation reimbursements. It was previously introduced in the last session of Congress but failed to advance.

Background

The Tax Cuts and Jobs Act passed in 2017 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.

About the Bill

The bill addresses the remaining 5% of impacted federal workers who remain vulnerable to the potentially higher tax bill and would let the government pay the higher tax bills for their relocation costs when they arise. It is being reintroduced by Senator Mark Warner (D-VA).

“Straddling our loyal public employees with part of the cost of their employment-related relocation is not just wrong, it’s also a disservice to our workforce,” said Warner. “This legislation will make sure that the government does not push these costs onto workers or inadvertently deter talented individuals from accepting positions that may force them to relocate.”

Congresswoman Elaine Luria (D-VA) reportedly will introduce companion legislation in the House of Representatives in the coming weeks.

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.