Regardless of the distance or time of year, relocating for a job is an expensive undertaking. Fortunately, many employers have relocation packages in place that reimburse employees for some, or all, of their moving expenses. Some relocation expenses are excludable from income tax, while others are considered additional taxable income by the IRS.
Excluded Moving Expenses
Qualified relocation expenses are not included in an employee’s income. They are paid directly to the employee or to third parties. Excludable expenses paid directly to the employee are noted on the employee’s W-2 form in box 12, while payments made directly to third parties on the employee’s behalf need not be reported on their W-2.
Excludable moving expenses typically fall into two primary categories, household goods and final move expenses. Below are some common costs related to these two categories.
Moving Household Goods
- Packing and unpacking household goods at the original and new residences
- Disconnecting, then reconnecting utilities for each home
- Transporting pets from the original residence to the new location
- Packing, crating and boxing supplies
- Transporting personal vehicles to the new location
- Storage expenses, usually for 30 to 90 days (depending on the policy and individual circumstances)
- Insurance on the household goods
Final Move Expenses
- Transportation expenses to physically move the employee and his/her family to the new residence
- In-transit lodging for the family
- Mileage expenses for employees traveling by car, but only the first $0.19 per mile in 2017 (varies each year) is excludable from income
To be excludable from income, the employee should take the most direct route to the news home.
Where to Find Information on Excludable Relocation Expenses
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.