UPDATE:   As a consequence of the tax law changes that were passed at the end of 2017, moving expenses (for other than military personnel relocation on official orders) are no longer deductible beginning in 2018.  Further, reimbursements received from the employer are taxable income treated as wages. 

Exception:  The Internal Revenue Service is allowing people to continue to deduct employer payments or reimbursements for employee moving expenses, as long as they happened before 2018, although the Tax Cuts and Jobs Act will change that for 2018 and going forward.

The IRS said Friday that employer payments or reimbursements in 2018 for employees’ moving expenses that were incurred prior to 2018 can be excluded from an employee’s wages for income and employment tax purposes.

The tax overhaul that Congress passed last year suspended the exclusion from income for moving expenses reimbursed or paid by an employer for most employees starting this year, so those amounts are now taxable, except for active-duty members of the U.S. Armed Forces whose moves are tied to a military-ordered permanent change of station.

Now, under Notice 2018-75, the IRS said Friday that reimbursements paid by an employer to an employee in 2018 for qualified moving expenses incurred in a prior year aren’t subject to either federal income or employment taxes. The same holds true if the employer pays a moving company in 2018 for qualified moving services provided to an employee prior to 2018.

To qualify, any reimbursements or payments have to be for work-related moving expenses that would have been deductible by the employee if the employee had directly paid them before Jan. 1, 2018. The employee must not have deducted them in 2017. For more information on the 2017 rules, see Form 3903 or Publication 521.

Employers that have already treated the reimbursements or payments as taxable events can follow the normal employment tax adjustment and refund procedures

PRIOR LAW

The IRS issued in August 2012 tax tips concerning moving expenses.  They are reprinted below:

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If you are moving to start a new job or even the same job at a new job location, the IRS offers 10 tax tips on expenses you may be able to deduct on your tax return.

1. Expenses must be close to the time you start work  Generally, you can consider moving expenses that you incurred within one year of the date you first report to work at a new job location. 

2. Distance Test  Your move meets the distance test if your new main job location is at least 50 miles farther from your former home than your previous main job location was from your former home.  For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.

3. Time Test  Upon arriving in the general area of your new job location, you must work full time for at least 39 weeks during the first year at your new job location. Self-employed individuals must meet this test, and they must also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test. There are some special rules and exceptions to these general rules, so see Publication 521, Moving Expenses for more information.

4. Travel  You can deduct lodging expenses (but not meals) for yourself and household members while moving from your former home to your new home. You can also deduct transportation expenses, including airfare, vehicle mileage, parking fees and tolls you pay, but you can only deduct one trip per person.

5. Household goods  You can deduct the cost of packing, crating and transporting your household goods and personal property, including the cost of shipping household pets. You may be able to include the cost of storing and insuring these items while in transit.

6. Utilities  You can deduct the costs of connecting or disconnecting utilities.

7. Nondeductible expenses  You cannot deduct as moving expenses: any part of the purchase price of your new home, car tags, a drivers license renewal, costs of buying or selling a home, expenses of entering into or breaking a lease, or security deposits and storage charges, except those incurred in transit and for foreign moves.

8. Form  You can deduct only those expenses that are reasonable for the circumstances of your move. To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses.

9. Reimbursed expenses  If your employer reimburses you for the costs of a move for which you took a deduction, the reimbursement may have to be included as income on your tax return.

10. Update your address  When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. Use Form 8822, Change of Address, to notify the IRS.

More details are available in IRS Publication 521 and Form 3903. IRS publications and forms are available on IRS.gov or by calling 800-829-3676.

Links:

• Publication 521, Moving Expenses (PDF)

• Form 3903, Moving Expenses (PDF)

• Form 8822, Change of Address (PDF)

• Tax Topic 455 - Moving Expenses 

YouTube Videos:

• Moving Expenses - English | Spanish | ASL

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Following is a more detailed discussion concerning the requirements to be able to deduct your moving expenses.

If you moved due to a change in your job or business location, or because you started a new job or business, you may be able to deduct your reasonable moving expenses, but not any expenses for meals. To qualify for the moving expense deduction, you must satisfy two tests. Under the first test, the "distance test", your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home.

The second test is the "time test". If you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months immediately following your arrival in the general area of your new work location. There are exceptions to the time test in case of death, disability and involuntary separation, among other things.

If you are a member of the armed forces and your move was due to a military order and permanent change of station, you do not have to satisfy the "distance or time tests".

Here is a recap of the rules for being allowed to deduct some or all of your moving costs:

(1) Move must be closely related to start of work. Generally, you can consider moving expenses incurred within one year from the date you first reported to a new location, as closely related in time to the start of work.

(2) Distance Test.  Your move meets the distance test if your new main job location is at least 50 miles farther from your former home than your previous job location was.  For example, let's say you commuted 20 miles from your old house to your old job. Now, you found a new job 75 miles away from your old house. Your commute to your new job is at least 50 miles further than your old commute (75 miles as compared to 20 miles). If you move, you can deduct your moving expenses.  On the other hand, if your new job was, say, 70 miles from your old house, you would NOT qualify for the deduction because your commute is not at least 50 miles further (65 miles as compared with 20 miles = 45 miles).

(3) Time Test. You must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location, or at least 78 weeks during the first 24 months if you are self-employed. If your income tax return is due before you’ve satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test in the following years.

(4) Travel. You can deduct lodging expenses for yourself and household members while moving from your former home to your new home. You can also deduct transportation expenses, including airfare, vehicle mileage, parking fees and tolls you pay to move, but you can only deduct one trip per person.  Keep all of your records relating to the costs incurred for the travel such as hotel receipts.  Also - keep a log of the miles driven each day.

(5) Household goods. You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.

(6) Utilities. You can deduct the costs of connecting or disconnecting utilities.

(7) Nondeductible expenses. You cannot deduct the following items as moving expenses: any part of the purchase price of your new home, car tags, drivers license, costs of buying or selling a home, expenses of entering into or breaking a lease, security deposits and storage charges except those incurred in transit.

(8) Form. You can deduct only those expenses that are reasonable for the circumstances of your move. To figure the amount of your moving expense deduction. use Form 3903, Moving Expenses.  The deduction is taken as an adjustment to income.  You do NOT have to itemize deductions to claim a moving expense deduction.

(9) Reimbursed expenses. If your employer reimburses you for the cost of the move, the reimbursement will generally reduce your allowable moving expense deduction.  If you received a reimbursement for moving and your move does NOT qualify for deduction (e.g., less than 50 miles further from your present home), you may have to include the reimbursement as additional income on your income tax return.

(10) Update your address. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS.

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Retirees Moving Back to the United States

Retirees or survivors who move to the United States. If you are a retiree who was working abroad, or a survivor of a decedent who was working abroad, and you move to the United States or one of its possessions, you do not have to meet the time test discussed in Publication 521. However, you must meet the requirements discussed below under Retirees who were working abroad or Survivors of decedents who were working abroad.

Retirees who were working abroad. You can deduct moving expenses for a move to a new home in the United States when you permanently retire. However, both your former main job location and your former home must have been outside the United States.

Permanently retired. You are considered permanently retired when you cease gainful full-time employment or self-employment. If, at the time you retire, you intend your retirement to be permanent, you will be considered retired even though you later return to work. Your intention to retire permanently may be determined by:

• Your age and health,

• The customary retirement age for people who do similar work,

• Whether you receive retirement payments from a pension or retirement fund, and

• The length of time before you return to full-time work.

Survivors of decedents who were working abroad. If you are the spouse or the dependent of a person whose main job location at the time of death was outside the United States, you can deduct moving expenses if the following five requirements are met.

• The move is to a home in the United States.

• The move begins within 6 months after the decedent's death. (When a move begins is described below.)
• The move is from the decedent's former home.
• The decedent's former home was outside the United States.
• The decedent's former home was also your home.

When a move begins. A move begins when one of the following events occurs.

• You contract for your household goods and personal effects to be moved to your home in the United States, but only if the move is completed within a reasonable time.
• Your household goods and personal effects are packed and on the way to your home in the United States.
• You leave your former home to travel to your new home in the United States.

CAUTION! If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction for that move.

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Moves to Locations Outside the United States

Foreign Moves. A foreign move is a move in connection with the start of work at a new job location outside the United States and its possessions. A foreign move does not include a move back to the United States or its possessions.

Storage Expenses. For foreign moves, costs of moving household goods and personal effects include reasonable expenses of moving the items to and from storage and storing them while your new place of work abroad is your principal place of work.

Allocation Of Moving Expenses

When your new place of work is in a foreign country, your moving expenses are directly connected with the income earned in that foreign country. If all or part of the income that you earn at the new location is excluded under the foreign earned income exclusion or the housing exclusion, the part of your moving expense that is allocable to the excluded income is not deductible.

If your new place of work is in the United States, the deductible moving expenses are directly connected with the income earned in the United States. If you treat a reimbursement from your employer as foreign earned income, you must allocate deductible moving expenses to foreign earned income.

For an explanation and example of how the allocation is done, refer to Moving Expenses in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

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Tax Withholding and Estimated Tax

Your employer must withhold income tax, social security tax, and Medicare tax from reimbursements and allowances paid to you that are included in your income. See Reimbursements Included in Income below.

Reimbursements Included in Income. Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even though they are for deductible moving expenses. See Publication 521. Your employer also must include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. This includes amounts your employer reimbursed you under an accountable plan (explained in Publication 521) for meals, house hunting trips, and real estate expenses. It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer.

Reimbursements Excluded from Income. Your employer should not include in your wages reimbursements paid under an accountable plan for moving expenses that you:

• Could deduct if you had paid or incurred them, and

• Did not deduct in an earlier year.

These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. Your employer should report these reimbursements in box 12 of Form W–2.

Estimated tax. If you must make estimated tax payments, you need to take into account any taxable reimbursements and deductible moving expenses in figuring your estimated tax. For details about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax.

CAUTION! You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income. In addition, you cannot claim a moving expense deduction for a move from the United States to a foreign country if after you leave the United States you will become a nonresident alien and your future income in the foreign country will not be subject to U.S. taxation.

For more details, review IRS Publication 521, Moving Expenses, and Form 3903, Moving Expenses. IRS publications and forms are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).