Relocation Tax Help

Relocation Tax Help

The Domestic Relocation Program provides relocation assistance for you and your family. Some services and reimbursements are:

  • deductible
  • excludable,
  • taxable
  • or taxable deductible.

When the company reimburses you for an expense that the IRS does not consider deductible, the company’s reimbursement becomes a tax burden to you.

Relocation Eligibility

Employees may deduct, as an adjustment to gross income, the expense of moving themselves and their household members from one location to another, if the move is related to starting work in a new location and the amount is reasonable. The IRS limits deductiome states. Duplicate house payments, are also deductible as mortgage interest when treated as your primary residence and second home. Real Estate Taxes You must account for your deductible moving expenses by giving your employer receipts or documentation as evidence of your moving expenses. You should submit a statement of expense and it is recommended that you keep a diary or similar record to include receipts, canceled checks, and bills.

MOVING EXPENSES-DEDUCTIBLE FROM INCOME

Whether your employer reimburses you or not for any of the following expenses, they are deductible from your income net of any reimbursement.

  • Household Goods and personal effects, includes cost of van, packing, crating, insurance, disconnecting & reconnecting utilities, and all appliances, satellite dishes, antennas, cable, etc.
  • Storage of household goods and personal items within a period of 30 consecutive days.
  • Shipping a car, motorcycle, boat, and pets.
  • Rental vans plus gas, oil, tolls, and parking fees.
  • Tips for the movers, includes cost of food items, donuts, coffee, pizza and sodas, etc.
  • Cost of any packing supplies you purchase for personal packing.
  • Moving a college student,
  • Transportation from Temporary living to your permanent home
  • Rental car for final move up to four days – 3 days in old location – 1 day in new location.
  • As of January 1, 2010, the IRS has adjusted the standard mileage allowances for use of a car in travel to 19.5 cents per mile for moving expenses.

MOVING EXPENSE – EXCLUDABLE FROM INCOME

Excludable moving expense paid directly on your behalf by your employer to a vendor or supplier, such as van line, are not included in any of the amount that are reported on your W-2, nor should they be included on Form 3903. This expense may be considered a business expense for the employer.

REIMBURSEMENTS (THE W-2 BOX 1 AND BOX 12)

Deductible moving expense reimbursements paid directly to you will be reported in Box 12 of your W-2 and will be preceded by the code letter “P”. Under no circumstances should they be included in Wages that are show in Box 1 of your W-2. Your employer must withhold federal income tax, social security tax, Medicare Tax and state tax from reimbursements. Most employers increase your reimbursement to make up for the deductions for taxes – called Gross-Up.

Gross-Up:

This enables you to be fully reimbursed for nondeductible moving expenses or provides some tax relief, depending on the company’s tax policy, for the monies paid to your or on your behalf.

Points:

when you are reimbursed for points on a new home mortgage, this will also be included with your taxable wages. You should include the amount paid to you on Schedule A, Itemized Deductions, as interest paid on your mortgage.

Lump Sum Reimbursement:

Should you receive a lump sum payment for moving expenses, you are entitled to deduct your actual costs for household goods move, travel, and lodging as part of your final move, on IRS Form 3903, since the entire amount of the lump sum payment is reported as wages in Box 1 of your W-2.