My employer paid my moving expenses in 2018 and I thought the Tax Cuts and Jobs Act let me subtract that from my Virginia income -- why was my subtraction denied?

Plain-English summary

A taxpayer whose employer paid his moving expenses in 2018 claimed a subtraction for those payments on his Virginia return. The Department disallowed it and assessed additional tax plus interest; the taxpayer paid the assessment but appealed, arguing that the federal Tax Cuts and Jobs Act of 2017 (TCJA) allowed the subtraction of moving expenses from federal adjusted gross income (FAGI).

The taxpayer had the TCJA's effect backwards. Before the TCJA, federal law let taxpayers deduct certain job-related moving expenses (IRC § 217) and excluded employer-paid moving expense reimbursements from income (IRC § 132). The TCJA didn't expand or create these benefits -- it suspended both of them for the 2018 through 2025 tax years, with a narrow exception for certain military personnel. Virginia's own conformity date to the Internal Revenue Code was updated by 2019 legislation to December 31, 2018, generally bringing Virginia into line with the TCJA starting with the 2018 tax year -- and Virginia didn't carve out an exception preserving the old moving-expense deduction or exclusion. That meant employer-paid moving expenses remained part of the taxpayer's FAGI, the starting point for Virginia taxable income, with no separate Virginia subtraction available to remove them. Because Virginia's own tax code doesn't independently provide a moving-expense subtraction, the Department's original disallowance was correct, and the refund request was denied.

What this means for you

Anyone whose employer paid or reimbursed moving expenses for a 2018-2025 move

Don't assume you can exclude or deduct those amounts on your federal or Virginia return. The TCJA suspended both the moving-expense deduction and the exclusion for employer reimbursements for 2018 through 2025 (except for certain military members under permanent-change-of-station orders), and Virginia -- which generally starts its own tax computation from federal adjusted gross income -- doesn't provide any separate state-level subtraction to bring that benefit back.

Taxpayers assuming federal tax law changes automatically create new state tax breaks

A federal law change doesn't automatically translate into a Virginia subtraction. Virginia only allows subtractions that are specifically written into its own tax code (Chapter 3 of Title 58.1) -- if there's no Virginia-specific provision addressing a particular type of income or expense, federal treatment (as incorporated into FAGI) generally controls for Virginia purposes too.

Common questions

Q: Does the Tax Cuts and Jobs Act let me subtract moving expenses my employer paid on my Virginia return?
A: No -- the TCJA actually suspended the federal moving-expense deduction and the exclusion for employer-paid reimbursements for 2018 through 2025 (except for certain military members), and Virginia has no separate subtraction for these payments.

Q: Since Virginia "conforms" to federal tax law, shouldn't a federal change automatically apply to my Virginia return too?
A: Conformity means Virginia generally follows federal law for terms and concepts already built into federal adjusted gross income -- but Virginia subtractions require their own specific statutory basis. Without a Virginia-specific moving-expense subtraction, there's nothing to claim even though the underlying federal rules changed.

Citations and references

• Va. Code § 58.1-301 (Virginia income tax terminology/conformity to the Internal Revenue Code, except where a different meaning is clearly required)
• 26 U.S.C. § 217 (moving expense deduction, suspended for 2018-2025 by the TCJA except for certain military members)
• 26 U.S.C. § 132(g)(2) (exclusion for employer-paid/reimbursed moving expenses, suspended for 2018-2025 by the TCJA)
• Virginia Tax Bulletin 19-1 (2/15/2019) (2019 legislation advancing Virginia's IRC conformity date to December 31, 2018)
• P.D. 19-100 (8/27/2019) (Virginia does not provide a separate subtraction for employer-paid or reimbursed moving expenses)

Subject

Subtraction: Moving Expenses - Tax Cuts and Jobs Act

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-107

Original ruling text

June 1, 2022

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek a refund of individual income tax paid by * (the “Taxpayer”) for the taxable year ended December 31, 2018.

FACTS

On his 2018 Virginia resident individual income tax return, the Taxpayer claimed a subtraction for moving expenses that were paid by his employer during the 2018 taxable year. The Department disallowed the subtraction and notified the Taxpayer of the proposed assessment amount, which included the additional tax due plus accrued interest. The Taxpayer paid that amount and appealed, claiming that the federal Tax Cuts and Jobs Act of 2017 (the “TCJA”) allowed the subtraction of moving expenses from federal adjusted gross income (FAGI).

DETERMINATION

Virginia Code § 58.1-301 provides, with certain exceptions, that the terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia . For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income (VTI) with FAGI. Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Chapter 3 of Title 58.1 of the Code of Virginia .

IRC § 217 allows taxpayers to deduct certain moving expenses paid or incurred during a taxable year in connection with the commencement of work by the taxpayer as an employee or self-employed individual at a new place of work. In addition, IRC § 132 provides an exclusion from income for any amount received from an employer as payment for, or reimbursement of, moving expenses that would be deductible under IRC § 217 if directly paid or incurred by the individual. Except for certain military personnel, these provisions were suspended by the TCJA for the 2018 through 2025 taxable years. See IRC §§ 217(k) and 132(g)(2).

Under legislation enacted by the 2019 General Assembly, Virginia’s date of conformity to the terms of the IRC was advanced from February 9, 2018, to December 31, 2018. See VTB 19-1 (2/15/2019). This legislation generally allowed Virginia to conform to the TCJA for the 2018 taxable year and thereafter. Because the Commonwealth did not make an exception for the suspension of the moving expense deduction allowable under IRC § 217 or the exclusion for payments or reimbursements by employers under IRC § 132, these provisions of the TCJA remained in effect for the 2018 taxable year for the purposes of filing Virginia income tax returns.

As stated above, income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Chapter 3 of Title 58.1 of the Code of Virginia . Virginia does not provide a separate subtraction for the payment or reimbursement of moving expenses by an employer. Thus, any moving expense payments or reimbursements included in the Taxpayer’s FAGI were not eligible for subtraction and, therefore, remained subject to Virginia income tax. See Public Document (P.D.) 19-100 (8/27/2019). As such, the Taxpayer’s request for a refund of Virginia income tax paid to satisfy the proposed assessment cannot be granted.

The Code of Virginia sections, Virginia Tax Bulletin and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/4027.B

Related Documents

19-1

19-100