Arizona Conforms to Tax Reform; Moving Expenses Still Deductible in 8 States

7.3.19 | Arizona has officially conformed to the federal Tax Cuts and Jobs Act (TCJA); for Arizonans, moving-related reimbursements will be taxable through 2025. This leaves eight states that allow the deduction of certain moving expenses related to household goods and/or final moves. The exception is military moves, which still allow moving expense deductions at the Federal and State level.

The following states still allow the exclusion in 2019:

• Arkansas

• California

• Hawaii

• Massachusetts

• Minnesota

• New Jersey

• New York

• Pennsylvania

As a static conformity state, Arizona must enact legislation to conform to federal tax changes. The state’s new law aims to reduce residents’ income taxes. Among other changes, it lowers income tax rates, increases its standard deduction, and provides a new dependent tax credit. With the passing of the new state law, moving-related expenses were not deductible in 2018 however, since the state delayed legislation, W-2 Forms did not reflect conformity. Therefore, many companies assumed these expenses were still excludable.

Our Advice

It is still unclear if Arizona will require companies who reported these expenses as excludable in 2018 to make any corrections. Orion Mobility will continue to monitor the progress of this new law and provide updates once Arizona provides any guidance. Companies who have Arizona-related relocations should ensure that their tax systems are updated with the latest Arizona tax tables and assess their gross-up tax policies to report these previously deductible expenses as taxable income.