In part 1, we discussed the rules for qualifying to take a deduction for moving expenses. In this part, we’ll go into what’s deductible, and how to deal with employer reimbursements.
IRS Publication 521 is the best resource for figuring out what’s deductible and what’s not. Basically you can deduct any costs associated with packing and moving your things (U-Haul costs, for example). You can also deduct travel costs, which would include mileage (at 19 cents a mile in 2016) and hotels. Meals are not deductible.
Instead of taking the mileage deduction, you could instead opt to deduct actual expenses for gas and oil on the move.
What’s Not Deductible
- Expenses related to selling your old home or buying a new home
- Pre-move house-hunting expenses in your new location
- Temporary living expenses in your new location while you look for permanent housing
This next section will be an attempt to discuss in very general terms what happens when your employer pays for part or all of your move.
An “accountable plan” refers to reimbursements for actual expenses, where you provide documentation to your employer and they reimburse you for your actual costs.
These reimbursements are not taxable to you, but will be reported on your W-2 in Box 12 with a code of “P.”
On your tax return, if your actual moving expenses are more than what your employer reimbursed you for, you can take a deduction for the excess.
Your move cost $5,000. Your employer reimbursed you $2,000 through an accountable plan. You can take a deduction for $3,000 of moving expenses on your tax return.
Employer Gives You a Lump Sum
If your employer pays you a lump sum to cover moving costs, the payment is counted as taxable income and included as wages. On your tax return, you take a deduction for your actual moving expenses.
Employer Pays Costs Directly to Third Party
In some situations, your employer might pay a third party directly. For example, they might pay the moving company directly. In that case, the employer payment is not included in your income but you also don’t get to take a deduction for those expenses (because your employer paid them, not you).