What Is Moving Expense Reimbursement?

Before you get into the details of reporting moving expense reimbursement, it helps to know what this term actually means. Moving expense reimbursement is money your employer gives you to help pay for the costs of relocating for work. These costs might include hiring movers, renting a moving truck, paying for temporary lodging, or even shipping your car. Sometimes, your employer might give you a lump sum upfront, while other times they’ll pay you back after you submit receipts. Either way, this payment is considered a moving expense reimbursement.

Not long ago, many people could deduct moving expenses or get these reimbursements without worrying about taxes. That changed after the tax law update in 2017. Now, for most employees, moving expense reimbursements are treated as part of your regular pay. In other words, you’ll probably owe income tax on the amount your employer gives you for moving costs. The rules are different if you’re an active-duty member of the Armed Forces and your move is due to a military order. For everyone else, your moving expense reimbursement will almost always show up on your W-2 form when tax time comes around.

Do You Have to Report Moving Expense Reimbursement?

For most people, yes. If you received a moving expense reimbursement from your employer, chances are you’ll need to report it as income on your tax return. Here’s why: since 2018, the IRS treats most moving expense reimbursements as taxable income. That means you can’t leave it out, even if your boss paid the moving company directly and you never saw the cash yourself.

Take a look at your W-2 form. The amount of your moving reimbursement is usually added to Box 1, which lists your total taxable wages. That total includes your salary, bonuses, and most reimbursements, including what your company paid for your move. It doesn’t matter if you spent the entire reimbursement or saved some of it. The IRS sees the whole amount as taxable income for the year.

Now, the big exception: if you’re an active-duty member of the Armed Forces and your move was because of a military order, the rules are different. In this case, your moving expense reimbursement is generally not taxable. Instead, your employer will list the amount in Box 12 of your W-2 with code P. That’s a sign you don’t have to include it as regular income on your tax return.

How to Report Moving Expense Reimbursement on Your Return

The process for reporting moving expense reimbursement is simple, but it’s important to do it right. Start by reviewing your W-2 form. Look closely at Box 1, which shows your total taxable wages for the year. If you received a moving expense reimbursement, that amount should already be rolled into the total.

When you fill out your Form 1040, you’ll report your total wages from Box 1 on line 1. There’s no need to break out moving reimbursements as a separate line item unless you qualify for the military exception. For most employees, all income, including moving reimbursements, lands in the same spot.

Let’s look at an example. Say you made $50,000 in regular wages and your employer reimbursed you $3,000 for moving expenses. Your W-2 Box 1 should show $53,000. You’ll enter $53,000 as your wages on your tax return. There’s nothing extra you need to do unless you qualify for a special exception.

If you are an active-duty military member, look for Box 12 on your W-2. The amount listed with code P doesn’t count as taxable wages, so you don’t report it as income on your Form 1040. Still, keep your records handy in case the IRS asks for proof about the nature of your move.

Can You Deduct Moving Expenses?

For most people, the answer is no. The Tax Cuts and Jobs Act took away the moving expense deduction for nearly everyone starting in 2018. Unless you’re an active-duty military member moving because of a military order, you can’t deduct moving expenses on your federal tax return. Even if you spent more on your move than your employer reimbursed, you can’t deduct the difference.

But there are a few exceptions worth knowing. Some states still allow a deduction for moving expenses on your state tax return. For example, California and New York have different rules than the federal government. If you moved for work, it’s a good idea to check your state’s tax website or talk to a tax professional to see if you qualify for a deduction at the state level. If you’re self-employed and the move is for business, there may be other deductions, but those are separate from standard moving expense rules.

Common Mistakes to Avoid

Handling moving expense reimbursement on your taxes can be tricky, especially with the recent rule changes. Here are a few mistakes people often make:

  1. Forgetting to include the reimbursement as income when required. Some people still rely on old advice and miss the fact that the law has changed.
  2. Trying to claim a deduction for moving expenses as a civilian. Unless you’re in the military and moved under orders, this deduction is gone from federal returns.
  3. Overlooking state-specific rules. Some states still allow deductions, but many do not. Double-check your state’s current rules.
  4. Assuming that direct payments to movers aren’t taxable. Even if your employer pays the moving company instead of reimbursing you, the amount is usually still considered income.
  5. Not keeping records. Even if you can’t deduct expenses federally, you might need supporting documents for state taxes or employer audits.

Carefully review your W-2 and keep all receipts and paperwork related to your move. If you’re not sure how to handle something, consider using tax software or reaching out to a tax professional for guidance.

Tips for Handling Moving Expense Reimbursement

Moving for work comes with lots of costs and paperwork, but sorting out your taxes can be straightforward if you stay organized. Here are some practical tips to make things easier:

  1. Keep records of all your moving expenses, even if you think you won’t need them. This includes receipts for movers, truck rentals, storage, and travel. You might need them for state taxes or if your employer asks for proof later.
  2. Check your W-2 as soon as you get it. Make sure any moving reimbursement is included in Box 1 if you’re a civilian. For military members, look for code P in Box 12.
  3. If your employer gave you a lump-sum payment, remember that the full amount is usually taxable, even if you spent less than you received. It’s tempting to think only your actual costs are taxed, but the IRS counts the full reimbursement.
  4. While most people can’t deduct moving expenses on their federal return, don’t forget to research your state’s rules. Some states still let you claim a deduction, so check before you file.
  5. Consider talking to your company’s HR or payroll department if you have questions about how your reimbursement was reported. They can often clarify what’s included in your W-2 and why.