There are many instances were an employee would have to move because of their job. With this move comes added expenses for the employee. That is why some businesses consider offering moving expense reimbursements as a fringe benefit. Let’s take a look at what a qualified moving expense is and if you can offer these reimbursements to your employees.
What is a qualified moving expense?
Moving expenses, according to the Internal Revenue Service, are costs that are incurred by an employee related to relocating or being transferred to a new location because of a job opportunity. Further, a qualified moving expense reimbursement is any amount received by an individual from an employer as a payment for, or a reimbursement of, expenses that would be deductible as moving expenses if paid directly by the individual.
Prior to 2018, employers could deduct moving expense reimbursements from employee wages. The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the deduction of moving expenses for tax years 2018 through 2025, except for members of the military on active duty who move as the result of a military order. For 2018 through 2025, employers must include moving expense reimbursements in employees’ wages. Only employees, or spouses, that are members of military and move as a military order can deduct moving expenses.
After tax year 2025, the law may revert back to allow these reimbursements for all employees. Stay tuned for updates as we get closer.
What moving expenses can be deducted from wages?
So, if you or your spouse is a member of the military on active duty who moves pursuant to a military order, you can deduct certain expenses. But you won’t be able to claim just anything as a moving expense. Allowable expenses are anything that is reasonable for the circumstances of your move of personal affects and goods, like:
- Cost of packing, crating, hauling a trailer, in-transit storage, and insurance
- Other costs related to transporting, storing, and insuring your household goods and personal effects
- Traveling expenses (including lodging) to your new home
Unfortunately, you can’t deduct any expenses for meals, or any moving expenses covered by reimbursements from the government (or paid for directly by the government) excluded from your income.
Remember to check back later for legislative updates as these moving expenses may be able to be deducted for all employees after 2025.