Bicycle Commuting Reimbursements No Longer Excluded from Employees’ Income but Still Deductible by Employers
Under the new tax law, employers can deduct qualified bicycle commuting reimbursements as a business expense for 2018 through 2025.
The new tax law suspends the exclusion of qualified bicycle commuting reimbursements from an employee’s income for 2018 through 2025. Employers must now include these reimbursements in the employee’s wages.
Exclusion from Income of Qualified Moving Expense Reimbursements
Per a transition rule in the new law, reimbursements an employer pays to an employee in 2018 for qualified moving expenses incurred in a prior year aren’t subject to federal income or employment taxes. The same is true if the employer pays a moving company in 2018 for qualified moving services provided to an employee prior to 2018. To qualify, reimbursements or payments must be for work-related moving expenses that would have been deductible by the employee if the employee had directly paid them before Jan. 1, 2018. The employee must not have deducted them in 2017. For more information on the 2017 rules, see Form 3903, Publication 521, or the FAQs for Moving Expenses.
Employers who have included these payments in individuals’ wages or compensation, can take steps to correct employment taxes for overpayment of taxes withheld. For more information about correcting employment taxes, see:
- Publication 15 (Circular E), Employer’s Tax Guide, and
- The instructions for Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund
Qualified Moving Expenses Reimbursements No Longer Excluded from Employees’ Income, with Two Exceptions
For 2018 through 2025, employers must include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.
Exception 1: Members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if:
- They are on active duty
- They move pursuant to a military order and incident to a permanent change of station
- The move expenses would qualify as a deduction if the employee didn’t get a reimbursement
Exception 2: Employers may exclude from wages any 2018 reimbursements to or payments on behalf of employees for moving expenses incurred for a move that took place prior to January 1, 2018, and which would have been deductible had they been paid prior to that date. See Notice 2018-75.
Employee Achievement Award — Tangible Personal Property Defined
Special rules allow an employee to exclude certain achievement awards from their wages if the awards are tangible personal property. An employer also may deduct awards that are tangible personal property, subject to certain deduction limits.
The new law clarifies that tangible personal property doesn’t include cash, cash equivalents, gift cards, gift coupons, certain gift certificates, tickets to theater or sporting events, vacations, meals, lodging, stocks, bonds, securities, and other similar items.