CapRelo Blog

Tax Deductible Relocation-Related Expenses

Posted by Amy Mergler on Thu, Mar 03, 2016

Loading_Car_into_Moving_Van.jpgNo one wants to pay higher taxes on top of the usual stress of moving, so your transferring employees will need to know which expenses are deductible and which are not.

Only those qualified expenses not directly reimbursed by the employer may be deducted. Any reimbursed expenses or those paid directly to a vendor, such as a moving van company, are not deductible, but usually are excluded as income. It is helpful to provide this type of relevant tax information to the employee to assist them during tax season.

Find out what you need to know in our free article, Relocation and U.S. Taxes.

Below are some deductible relocation expenses allowable by the IRS.

Automobile Expenses

The IRS Code Section 217 governs the deductions for moving expenses. Because the tax laws can and do change yearly, especially regarding business mileage rates and travel allowances, it's important to consult a company knowledgeable in tax law as it pertains to transferee relocation. For example, the standard mileage deduction rate of 2014 was 23.5 cents per mile for qualifying automobiles, with 56 cents per mile for business and dropped to 23 cents per mile in 2015. The employee may opt to itemize and deduct actual out-of-pocket expenses for gas, oil, parking and tolls or they may deduct 23 cents per mile as of January 1, 2015, which is easier than accounting for all actual out-of-pocket expenses.

Household Goods Moving Expenses

Money spent on packing, including supplies and labor, and transporting an employee's belongings, pets and automobiles are currently allowed, as is temporary storage of belongings for up to 30 days.

Utility Disconnection and Reconnection Fees

These expenses are deductible for both old and new residences.

Travel Expenses

Travel expenses include airfare, bus or train fares as well as hotel stays during the actual move. Note that meals en route are not included. Meals eaten at restaurants as well as entertainment are now considered to be out-of-pocket expenses. Because only the most direct, fastest route will be allowable, any extended vacation stay-overs or side trips will not be deductible.

Reloc

 

Although this written communication may address tax issues, it is not a covered opinion as described in Circular 230.  Therefore, to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments), unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

Topics: tax impact of relocation

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