Prior to the Tax Cuts and Jobs Act (TCJA), when a new employee had to relocate a certain distance away and the employer reimbursed moving expenses, the moving expense reimbursement was not recognized by the employee and the employer got a tax deduction for paying the cost. If the employer did not reimburse relocation costs, then the employee could deduct costs for relocation. However, after the TCJA, the reimbursement is no longer excludable income to the employee but the employer still gets the deduction if it is paid as part of the employees wages (just like any other wage income). Thus, ignoring the effect on employment taxes owed by the company and the time value of money, the employers tax consequence doesnt change. However, the employee is now at a disadvantage because part of the reimbursement will go to taxes on the reimbursement rather than covering her moving costs. Assume the employee faces a tax rate of 20% throughout her lifetime.

What amount of wages (before tax) in the pre-TCJA period (when moving expense reimbursements were still excludable from taxable income) would make the employee indifferent between receiving the taxable gross wages and tax-free reimbursement for her moving costs of $10,000? We are ignoring the implications for employment taxes of having a greater amount of wages.