Recent Tax Updates
Mobility Tax Advisor – Tax Update 11/19/2018
11/19/2018: Kentucky becomes a conforming state, meaning no moving expense deductions are available in tax year 2018.
New 2019 FICA Wage Base
The IRS has announced the following changes for 2019:
- Social Security and Supplemental Security Income (SSI): Benefits will increase by 2.8%
- Social Security Wage Base: The limit will increase from $128,400 in 2018 to $132,900 in 2019
- Medicare Rate: Same rate of 1.45% for Medicare and extra 0.09% for income exceeding $200,000 if Single or Head of Household, $250,000 if Married Filing Jointly, or $125,000 if Married Filing Separately.
For more information on these changes, please refer to the IRS update here.
Mobility Tax Advisor – Tax Update 10/9/18
10/9/2018: South Carolina becomes a conforming state, meaning no moving expense deductions are available in tax year 2018.
Mobility Tax Advisor – Tax Update 9/24/18
9/24/2018: Maine becomes a conforming state, meaning no moving expense deductions are available in tax year 2018.
Update on State Tax Conformity to IRC
As of September 4, 2018, fourteen (14) states do NOT plan on taxing moving expenses in tax year 2018. Generally speaking, those 14 states will follow previous years’ rules allowing moving expense deductions for van line expenses (HHG) and final move, non-meal, expenses. A total of six (6) states, have already passed laws specifically stating they will not tax moving expenses. These states are:
- AZ, HI, KY, NY, PA, VA
While the other eight (8) other states have not conformed to the new 2018 federal law – meaning they currently allow moving expense deductions – they have not specifically passed any new laws to address how this will be handled in the future. These states are:
- AR, CA, IA*, MA, ME, MN, NJ, SC
*Will conform to federal law in 2019
To maintain compliance and reduce risk, mobility professionals will need to track these changes closely, especially those who gross up taxable relocation expenses for domestic moves.
State Tax Conformity to IRC
As of February 2018, there are 20 US states that do not follow – or conform to – recent changes to the Federal Internal Revenue Code (IRC). Two states do not reference the IRC and the remainder follow the IRC as of a date prior to the recent Tax Cuts and Jobs Act of 2017, thus treating qualified moving expenses paid in 2018 as excluded from compensation reporting or deductible by the employee. Those states are: Arizona, Arkansas, California, Georgia, Hawaii, Idaho, Indiana, Iowa, Kentucky, Maine, Massachusetts, Minnesota, Mississippi, New Jersey, North Carolina, Oregon, South Carolina, Virginia, West Virginia, and Wisconsin.
There are already a few states that have passed, or are in the process of passing, legislation that will change the IRC conformity date. The expectation is that most of these states will update their conformity date in the coming months. However, many of them will probably set conformity to law effective as of Dec 31, 2017 or similar for purposes of the 2017 tax year. These same states could pass legislation this time next year setting the conformity date to Dec 31, 2018 for the 2018 tax year, which means that previously excludable expenses would be considered taxable in 2018.
Ineo is using currently enacted law in these 20 states to determine taxability for these qualified moving expenses and has included options for its clients to process the related relocation expenses for state reporting purposes as either taxable or nontaxable, depending on the assumption the client makes.
Ineo will continually communicate with its clients as to updates for the states as legislation may change throughout the year. Ineo will also provide specific details for year-end processing for state purposes.
We recommend employers discuss with their payroll contacts the capability of accepting a state reportable wages amount which is separate and different from the Federal reportable wages amount.
2018 Supplemental Rate
The IRS released today the updated 2018 withholding tables which include a decrease in the 2018 supplemental rate from 25% to 22%. The withholding tables must be implemented by February 15, 2018, however, employers are encouraged to start using them as soon as possible. Employees will begin to see the effects of the new tax laws in their paychecks in February.
For more information and to see the IRS 2018 Withholding Tables, visit https://www.irs.gov/pub/irs-pdf/n1036.pdf
2018 Federal Tax Information and Gross-up Percentages
This handy guide provides frequently sought after tax information, rates, and gross-up percentages for 2018, along with a comparison to 2017 data. This guide is even more important while we implement the newly passed tax reform into our mobility programs.Download PDF
What 2018 Tax Reform Means for the Mobility Industry
Tax reform has officially passed both the House and the Senate and is now on its way to the President’s desk.
Starting January 1, 2018, this is what the mobility industry needs to know:
- State and Local Income Property Taxes
- 2018 state gross-up is now taxable if the total of the state and local taxes exceeds $10,000
- The Child Tax Credit
- $2,000 refund per child under the age of 17 before 12/31/18
- The phase-out limitation new starting point is increasing:
- Married Filing Jointly: from $110,000 to $400,000
- Single: $200,000
- More tax reconciliations will be needed in tax year 2018
- No more Itemized Deduction nor Personal Exemption Phase-outs
- No more Personal Exemptions
- Standard Deductions increasing:
- Married Filing Jointly: $24,000
- Single: $12,000
- The mortgage limitation is being reduced from $1,000,000 to $750,000 for new mortgages taken out after 12/14/17.
- Exemption amounts have increased for AMT, this still involves complex calculations – more tax reconciliations will be needed in tax year 2018.
- There is no change to home sale rules – remains 2 out of past 5 years residency requirements.
- Both HHG and Final Move expenses become taxable on January 1, 2018. This increases the average gross-up by approximately $10,000 to $15,000. Companies will need to budget accordingly for this change as well as adjust their relocation accounting systems and payroll interfaces to ensure compliance.
- The supplemental payroll withholding rate has been reduced from 25% down to 22% on supplemental payments under one million dollars, and from 39.60% to 37% on supplemental payments exceeding one million dollars.
These new laws affect both company policies and compliance requirements. All companies should seek guidance and approval from their internal tax, legal and HR departments plus their external auditors as well.
Ineo Global Mobility Tax Services can help you navigate these changes with gross-up audits, tax Q&A, and policy tax consulting. Visit www.ineomobility.com/tax-services/ or call 303.219.7291 today to learn more about how Ineo can help you ensure that your mobility program stays compliant while implementing these changes.
2018 Standard Mileage Rates
The IRS has announced the 2018 mileage rates. These rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes:
- Business mileage rate increased to $0.545/mile
- Charitable mileage rate remains unchanged at $0.14/mile
If you have questions regarding mileage rates or any of our tax updates, please contact Ineo Tax Services at (203) 529-3020.
2018 FICA Limit Increase
The 2018 FICA limit has increased from $127,200 in 2017 to $128,400 in 2018. The Social Security Administration had originally announced that the increase would be $128,700, however, this increase was revised after receiving additional salary data that had not been included in the original calculation. The wage base calculation is determined by annual increases in a national wage index. Mobility professionals must be aware of this change as it relates to gross-ups and payroll calculations.
For questions related to gross-up calculations and audits, please reach out to Mary Reilly at 303.219.7291 or email@example.com.