My Employer Gave Me a Move Allotment to Relocate: Do I Have to Claim This as Income, or Can I Deduct Expenses Over and Above the Relocation Money?
When your employer provides a relocation allowance to help you move for a new job, the tax treatment depends on whether the payment is considered taxable income and whether you can deduct additional moving expenses.
Is the Relocation Allotment Taxable Income?
Generally, moving expense reimbursements or allowances provided by an employer are considered taxable income unless they meet specific IRS criteria for exclusion. However, under current tax law, most moving expense reimbursements are no longer deductible for employees, and the employer’s payment is typically treated as taxable income to the employee.
Can I Deduct Moving Expenses Over and Above the Relocation Money?
As of recent tax law changes, employees can no longer deduct moving expenses on their federal tax return, even if they incur costs beyond what the employer reimbursed. This means that any additional expenses you pay out-of-pocket (such as packing, transportation, or temporary lodging) are not deductible for tax purposes.
Previously, employees could deduct moving expenses if the move was closely related to starting a new job and met distance and time tests. However, these deductions are no longer available for most taxpayers under current law.
What Forms Are Involved?
- Form 3903 – This form is used to report moving expenses, but it is no longer available for most employees due to changes in tax law.
- Form 1040 – You may need to report the relocation allowance as income on your Form 1040, depending on whether it was paid directly to you or reimbursed after expenses.
Important Notes
- Employer-provided moving allowances are typically reported on your W-2 as taxable income.
- You cannot deduct moving expenses if you are an employee unless you are in a specific category (e.g., military personnel or certain government employees).
- Always consult with a tax professional or use OLT (Online Taxes) software to ensure accurate reporting.
Source:
Form 3903 Instructions
Publication 525: Taxable and Nontaxable Income
Publication 505: Tax Withholding and Estimated Tax
Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions before filing your return.