What Moving Expenses Are Typically Reimbursable?

If you’re relocating for work, employers usually handle moving expenses in three ways. They either pay expenses for you, reimburse you for reasonable expenses, or they provide a dollar amount moving allowance. Whichever method your company uses, get in writing what they will cover, especially if they will only cover up to a certain dollar amount. Getting your employer to pay directly may be the best for you, since any payments made to a third party on your behalf don’t have to be reported to the IRS. 

Your employer may cover the cost of a trip to find a new home. They will also cover the cost of moving your goods and moving yourself and your family to the new location. This may include either airfare for your family or mileage for you to drive, hotel stays along the way, and maybe a per diem for food. It won’t cover a vacation in the middle of your move. If on your trip to your new home, you drive past an amusement park and stop for the day, your admission wouldn’t be covered, but possibly your meals while there would be. Likewise, your mileage would be covered if the amusement park was on a direct route, but not if you had to drive several hundred miles out of the way to get there.

While you want your employer to cover as much of your moving costs as possible, you want to be careful that you don’t go too far in claiming moving expenses. That’s because in order for reimbursed moving expenses or a moving allowance to not be considered income, and taxed as income, you have to be able to deduct them, and they have to meet the Internal Revenue Service’s definition of reasonable moving expenses. These include:

• The cost of packing, crating and transporting household goods of the employee and family. This includes cars and pets.
• The cost of connecting or disconnecting utilities.
• The cost of transportation to the new home for the employee and family, although they don’t have to travel together (mileage on two cars could be deductible if you and your spouse traveled on different dates).
• Lodging for one day after the employee could no longer live in their home.

If your company reimburses for the house hunting trip, for more than one day’s lodging, or for food, you will owe taxes on the amount of your non-qualified, and non-deductible, reimbursements. Additionally, if they reimburse you for mileage at a rate higher than the IRS rate, you will owe tax on the difference between the federal rate and your company’s rate. Your W-2 will then include both qualified and non-qualified moving expenses, with non-qualified expenses reported in your wages.

If your employer will reimburse for more moving costs than are deductible, plan for the taxes, especially if they cover several thousand dollars in hotel and food bills between a house-hunting trip, or if they provide an allowance to help you settle in.