The new TCJA law enacted in 2017 had an impact on the qualified moving expense reimbursements. The act suspended the above-the-line deduction in addition to the moving cost exclusion from 2018 to 2025. In this sense, moving costs reimbursed or met by the employer over the 7-year period must be included in the worker’s taxable income. Before the law was enacted, an above-the-line deduction was permitted for an individual on Form 1040 for specific residential moving costs incurred with regard to the individual’s work. The employer reimbursements to a worker for qualified moving costs were not taxable to the worker and were deductible as an expense by the employer. The new law made it mandatory for employers to incorporate moving cost reimbursements in the wages of workers. However, there is an exception to this rule with regard to US Armed Forces members. They can exclude qualified moving cost reimbursements from their earnings if they are on active duty and they relocate while following a military order.
Tax Credit
According to the TCJA, the employer credit for paying family and medical leave can be claimed by entities offering paid leave to workers as per the Family and Medical Leave Act enacted in 1993. The amount can be claimed for remuneration paid during tax years that start in 2018 and 2019. The credit rate is dependent on how much the entity offers for paid family and medical leave relative to remuneration normally paid (Geiszler & McKinley, 2018). If the paid leave amounts to 50 percent of wages typically paid to a worker, the tax credit will amount to 12.5 percent of the wages paid. If the paid leave amounts to 100 percent of the wages typically paid to a worker, the tax credit amounts to 25 percent of the remuneration paid. The credit proportion doubles from 12.5% to 25% as the leave increases from 50% to 100% of the remuneration paid. No credit is claimed for paid family and medical leave that is below 50% of the remuneration normally paid. Additionally, no credit is claimable for remuneration paid on leave that is above the worker's normal wage rate. The credit is claimable for paid family, and medical leave offered to specific lower-compensated workers. For remuneration to qualify for the credit, the remuneration in the preceding year cannot be more than sixty percent of a highly compensated worker threshold (Geiszler & McKinley, 2018). For instance, in 2018, remuneration in 2017 cannot have surpassed $72,000. In addition, for the entity to claim a credit for remuneration paid to a worker, the worker must have been employed for more than a year. The paid family and medical leave wages amount for which the credit is claimable cannot be more than 12 weeks per worker per year. Moreover, all qualified workers must be offered at least two weeks of paid family and medical leave for an entity to claim the credit.
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Opportunity Zones
The TCJA offered tax benefits for Investments in Qualified Opportunity Zones. The act permits the temporary postponement of inclusion in gross earnings for any capital-based gain that is put back into a qualified opportunity fund. It also allows a possible decrease of the amount of gain realized via a basis adjustment. If the investment in the eligible opportunity zone fund is kept by the individual for more than five years, the basis accredited to the normal gain is incremented by ten percent of the typical gain (Demmett, 2018). If the taxpayer holds the opportunity zone asset for more than seven years, the basis accredited to the normal gain is incremented by fifteen percent of the normal gain. In effect, ten or fifteen percent of the postponed capital gain is excluded permanently. The remaining postponed gain is recognized on the date which the qualified opportunity zone asset is sold or ending December 2026, whichever date comes before. The post-acquisition capital gain on assets in opportunity zone funds that are kept for more than ten years are excluded from gross income, and in such a case, the investor can benefit from a tax incentive (Demmett, 2018). Investors can continue to recognize losses linked with assets in qualified opportunity zone funds as stipulated in current law.
Highlights
A key highlight of the tax reform for families and individuals is concerned with healthcare coverage. Under the act, the amount of individual combined responsibility payments is decreased to zero for months starting after the end of 2018. Another highlight is the reduction in taxes paid by individuals and businesses. High taxes are detrimental to the individual and businesses since they reduce their earnings. From 2018 to 2025, most individuals will settle lower tax obligations than they did for 2017. Under the new law, the 2019 tax proportions were ten, twelve, twenty-two, twenty-four, thirty-two, thirty-five, and thirty-seven percent. Another highlight is the law's impact on standard deduction. For the tax year 2019, the standard deduction for the single and married filing jointly statuses are $12,200 and $24,400, respectively. The standard deductions mean that individuals cannot itemize the deductions for items such as mortgage interest or state taxes (“How Did,” n.d.). Another key highlight of the tax reform is the suspension of moving cost deductions. Between 2018 and 2025, no deduction is permitted for the use of a car as part of the move.
References
Demmett, R. (2018). Qualified Opportunity Zones FAQs . Withum. https://www.withum.com/resources/qualified-opportunity-zones-faqs/ .
Geiszler, M., & McKinley, J. (2018). New tax credit for paid family and medical leave . Journal of Accountancy. https://www.journalofaccountancy.com/issues/2018/dec/tax-credit-paid-family-medical-leave.html .
How did the TCJA change the standard deduction and itemized deductions? (n.d.). Tax Policy Center. https://www.taxpolicycenter.org/briefing-book/how-did-tcja-change-standard-deduction-and-itemized-deductions .
