Tax Law Changes For Moving & Relocation Expenses

Effective January 1, 1999, reimbursements for the following expenses are subject to withholding, including Federal income tax (22%), State income tax (6.6%), Medicare (1.45%) and Social Security (6.2%) for a total of 36.25% withholding: The tax reform bill (H.R. 1, P.L. 115-97), which was enacted on December 22, 2017, included a change to the taxability of moving and relocation expenses. In 2017 and prior years, certain “qualified moving expenses” for new employees were excluded from gross income.

PLEASE NOTE: As of January 1, 2018, all moving expenses paid or reimbursed by the CSU are taxable as wages to the recipient. This information will be reported to the State Controller’s Office. The payroll warrant distributed to you, or a subsequent payroll warrant, may have the 36.25% taxes withheld. This will be in addition to your normal payroll withholding.

• Meals connected with the move;
• Pre-move house search trips;
• Temporary living expenses;
• Leases, unexpired or new;
• Storage more than 30 days after moving into residence;
• Mileage reimbursement in excess of the federal moving expense mileage rate (16 cents per mile, new rate effective January 1, 2021).

In addition, any moving expenses reimbursed when either the federal time test or the federal distance test is not satisfied are also subject to withholding. To satisfy the federal time test, an employee must work full time for 39 weeks during the 12 months immediately following the move. To satisfy the federal distance test, an employee's new headquarters must be at least 50 miles farther from the employee's former residence compared to the distance between the former residence and the old headquarters.