If you moved for work-related reasons in 2017, you might be able to deduct some of the costs on your 2017 return — even if you don’t itemize deductions. (Or, if your employer reimbursed you for moving expenses, that reimbursement might be excludable from your income.) The bad news is that, if you move in 2018, the costs likely won’t be deductible, and any employer reimbursements will probably be included in your taxable income.

Suspension for 2018–2025

The Tax Cuts and Jobs Act (TCJA), signed into law this past December, suspends the moving expense deduction for the same period as when lower individual income tax rates generally apply: 2018 through 2025. For this period it also suspends the exclusion from income of qualified employer reimbursements of moving expenses.

The TCJA does provide an exception to both suspensions for active-duty members of the Armed Forces (and their spouses and dependents) who move because of a military order that calls for a permanent change of station.

Tests for 2017

If you moved in 2017 and would like to claim a deduction on your 2017 return, the first requirement is that the move be work-related. You don’t have to be an employee; the self-employed can also be eligible for the moving expense deduction.

The second is a distance test. The new main job location must be at least 50 miles farther from your former home than your former main job location was from that home. So a work-related move from city to suburb or from town to neighboring town probably won’t qualify, even if not moving would have increased your commute significantly.

Finally, there’s a time test. You must work full time at the new job location for at least 39 weeks during the first year. If you’re self-employed, you must meet that test plus work full time for at least 78 weeks during the first 24 months at the new job location. (Certain limited exceptions apply.)

Deductible expenses

The moving expense deduction is an “above-the-line” deduction, which means it’s subtracted from your gross income to determine your adjusted gross income. It’s not an itemized deduction, so you don’t have to itemize to benefit.

Generally, you can deduct:

• Transportation and lodging expenses for yourself and household members while moving,
• The cost of packing and transporting your household goods and other personal property,
• The expense of storing and insuring these items while in transit, and
• Costs related to connecting or disconnecting utilities.

But don’t expect to deduct everything. Meal costs during move-related travel aren’t deductible nor is any part of the purchase price of a new home or expenses incurred selling your old one. And, if your employer later reimburses you for any of the moving costs you’ve deducted, you may have to include the reimbursement as income on your tax return.

Please contact us if you have questions about whether you can deduct moving expenses on your 2017 return or regarding what other tax breaks will and will not be available for 2018 under the TCJA.

The U.S. Senate voted 52 to 48 on November 29 to begin floor debate on the Republican tax reform bill. That Senate debate started on November 30 and is limited to 20 hours. Part of the challenge in passing this bill is to keep the tax cut cost over the next 10 years to no more than $1.5 trillion dollars. In the Senate, any amendments to the tax reform legislation that passed the Senate Finance Committee that result in greater tax cuts will require other changes to pay for any additional tax cut proposals. If the Senate is able to pass their tax legislation, then a Conference Committee of House representatives and Senators will convene to try to resolve the differences in the two tax legislative bills. Then, once the Conference Committee reaches an agreement, it will need to be approved by both the House and the Senate before going to the President for signature.

At this point, there are only 10 legislative days left in the House and 12 days in the Senate. If legislation is not passed by both the Senate and the House by the end of 2017, the process is likely to slow down and be more difficult to pass. If the legislation is pushed into 2018, the process will essentially begin again and passage will likely become more difficult.

The Senate bill contains many of the same proposals as the House bill, but also differs in several significant respects. Here are some of the differences:

• Where the House bill would create four income tax rates for individuals at 12 percent, 25 percent, 35 percent and 39.6 percent, the Senate bill would employ a seven-bracket system, with tax rates of 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent, and 38.5 percent. The 38.5 percent rate would start for single taxpayers with taxable income over $500,000 and for married taxpayers filing jointly with taxable income over $1 million, which are the same thresholds in the House bill.
• The Senate bill would allow individuals to deduct 17.4 percent of “domestic qualified business income” passed through from a partnership, S corporation, or sole proprietorship. The deduction would not apply to specified service businesses, except in the case of a taxpayer whose taxable income does not exceed $150,000 (for married individuals filing jointly; $75,000 for other individuals). The benefit of the deduction for service providers would be phased out for taxable income exceeding $150,000 (for married individuals filing jointly; $75,000 for other individuals). In the case of a taxpayer who has qualified business income from a partnership or S corporation, the amount of the deduction would be limited to 50 percent of the W-2 wages of the taxpayer. The House bill reduces the tax rate on partnership, S corporation, or sole proprietorships to 25 percent. Many pass-through business owners would be eligible for the 25 percent rate on 30 percent of their income, with the balance being taxed as ordinary income and subject to self-employment tax.
• The Senate bill would increase the child tax credit to $2,000, while the House bill caps that deduction at $1,600. The Senate’s child tax credit would be modified to allow a $500 nonrefundable credit for qualifying dependents other than children. The Senate bill would also keep the adoption tax credit and the child and dependent care credit, which would be repealed by the House.
• The Senate bill would entirely eliminate the deduction for state and local taxes. The House bill would allow a deduction for state and local real property taxes, up to $10,000.
• The Senate bill would retain the current deduction for medical expenses that exceed 10 percent of a taxpayer’s adjusted gross income. In addition, unlike the House bill, the Senate bill would not change the current alimony rules.
• While the House plan would limit the deductibility of mortgage interest to $500,000 of acquisition indebtedness, the Senate bill would retain the current limit of $1 million but would repeal the deduction for interest on home equity indebtedness. The House bill would grandfather mortgages incurred before November 3, 2017.
• The Senate bill would eliminate the individual health care mandate and related subsidies projected to save over $300 billion over 10 years. The House does not propose to eliminate the individual healthcare mandate.
• The Senate bill would lower the corporate tax rate to 20 percent—like the House bill—but would delay that lower rate until 2019. There is pressure to increase the corporate tax rate to 22 percent rather than 20 percent.
• The Senate bill would not repeal the estate tax but would double the exemption amount. Many believe the estate tax will not be repealed after 2023 as in the House bill.
• Some Senators are looking to have a trigger for up to $350 billion in tax increases over 10 years if economic growth does not meet revenue targets. This would increase uncertainty and likely stunt economic growth.

There are many other differences between the Senate bill and the House bill. We will continue to keep you apprised of developments.