Legislation has been introduced in the House to prevent some federal employees from having to pay additional taxes on their reimbursable moving expenses.
The bill (H.R. 2265) was introduced by Congresswoman Elaine Luria (D-VA). It is companion legislation to a bill that was recently reintroduced in the Senate by Mark Warner (D-VA).
Background
A provision in 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 members of Congress who represent districts home to many federal employees 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, this left another 25,000 or so federal workers who receive moving reimbursements, generally new and retiring employees, ineligible for the reimbursement. Examples include teachers working for the Defense Department who teach at schools worldwide or new employees likely to be transferred after being hired at agencies such as the Federal Bureau of Investigation.
About the Legislation
Both the House and Senate versions of the legislation would address the remaining 5% of employees impacted by this unique situation. If enacted, the bill would let the government pay the higher tax bills for their relocation costs when they arise.
The same legislation was previously introduced in the last session of Congress but failed to advance.
“Moving should not be a burden on federal employees working for America,” Luria said. “Our bill would eliminate an unnecessary worry for workers transitioning to a new location to serve our nation.”
