Tax Tip: Relocation/Moving Allowance
- August 1st, 2023
- in News
As a result of the Tax Cuts and Jobs Act that went into effect on January 1, 2018, the exclusion/deduction for qualified moving expenses has been eliminated, and the University has adopted a moving allowance policy. If a department wishes to pay an amount towards relocation costs for a new hire, this will be paid as a taxable moving allowance.
There are two options for the timing of moving allowance payments:
Prior to Employment Start Date: If the moving allowance is paid in advance of the employment start date, no taxes are withheld at the time of issuance. However, applicable taxes will be withheld from one or more regular paychecks once the employee is active on Payroll. The Tax Office will notify the employee by email in advance of the taxation. The taxable moving benefit will appear as a line item on the employee’s pay stub in each period where taxation occurs. The number shown on the pay stub is the amount of benefit that is being taxed in that pay period, not the amount of taxes being deducted. The tax deduction amounts will vary depending on the employee’s individual tax bracket and filing status.
After Employment Start Date: If the moving allowance is paid after the employment start date, the payment is processed through Payroll. For this option, applicable taxes are withheld at the time of payment with no impact on subsequent paychecks.
For further details, refer to the following website links:
Tax Office – Relocation/Moving Expenses: https://taxoffice.ua.edu/fringe-benefit-taxation/#RelocationMoving
A/P – Relocation Allowances: http://accountspayable.ua.edu/relocation-allowances/
A/P – Spending Policy – Section 9.0 Relocation/Moving Expenses: http://accountspayable.ua.edu/spending-policy/#Relocation