While the Tax Cuts and Jobs Act (TCJA) did provide savings, there is one major change that is going to hit many Clergy’s tax return and wallet hard this year. This is especially true when we consider that Clergy never really stay in one place.
For many years, Clergy have relied on either writing off moving expenses from their tax return, or being reimbursed by their church for moving expenses without tax consequence. However, TCJA has changed all of that.
Moving Expense Deduction
In previous years, if a Clergy person wasn’t reimbursed for their move, they could simply write it off on their tax return as an adjustment to income. This option could result in some pretty large savings. So, let’s say that your tax rate was 25% and you paid $5,000 in moving expenses, that would have given you a savings of $1,250 on your income taxes. That’s a lot of money!
With the recent changes implemented through the TCJA, any moving expense incurred starting in 2018 will no longer be allowed as a deduction.
Moving Expense Reimbursement
You may be thinking that this doesn’t apply to you. Maybe your employer reimbursed you for your moving expenses. So you are in the clear… Right? Unfortunately, the TCJA has removed the tax free benefit of moving expense reimbursements. What this means is that if you have been reimbursed for your moving expenses, that reimbursement must be added to your W-2 as Cash Salary income (which means it is subject to Income Tax, Social Security Tax, and Medicare tax).
Now, some of you might still be thinking that you have out-foxed the federal government because your employer paid the moving company directly. Well, you would be wrong again. The TCJA also states that payments made directly to a third party involved in your move must also be added as cash salary.
If you moved in 2017, but your employer didn’t write you a check until 2018, that moving reimbursement will not be taxed.
If you have moved in 2018, you must plan accordingly. There is still time to make corrections to your estimated tax payments and/or withholding. Please contact Jacobson Clergy Tax Service for help with your tax plan.