Moving Expense Examples

Moving Expense Examples

Also refer to the University Moving and Relocation Standard Practice Guide Number 201.68.  Please note that the items discussed below are examples and are not specific to your move.  They are meant to assist you with understanding the tax consequences related to a move.

Are your expenses reimbursable by the University?

The Department Head, Dean or Director may agree to reimburse your moving expenses.  Only actual and reasonable expenses will be reimbursed.  The agreement should be in writing prior to the move to alleviate potential misunderstandings.

If the expenses are reimbursed by the University, are they subject to income tax or are they nontaxable?

In general, moving and relocation expense reimbursement is considered taxable income to the individual, included on Form W-2, and is subject to income and FICA tax withholding. 

However, an employer should not include in your wages any reimbursements paid under an accountable plan for moving expense that (1) could deduct if you had paid or incurred them, and (2) did not deduct in an earlier year.  These reimbursements are fringe benefits excluded from your income as qualified moving expense reimbursements and will be reported in box 13 of Form W-2.  If your employer reimburses you for both deductible and nondeductible moving expenses, your employer will determine the amount of the reimbursement that is not taxable and not subject to withholding.  Any remaining amount under an accountable plan.  For a moving expense to qualify as nontaxable, the move must meet a 3-part test:  Closely Related to Job Test, Distance Test, and Time Test.

If you meet the requirements of a qualifying move, the Internal Revenue Service allows reasonable expenses in the following categories to be nontaxable:

  • (1) Moving your household goods and personal effects from the old home to the new home. Moving includes the actual and reasonable expenses of packing, crating and transportation and storage up to 30 days.
  • (2) Traveling from the old home to the new home for the employee and family (including lodging but not meals). For family members to qualify, they must use both the former and new home as his or her residence.

How long may I take to move?

If you meet the 3-part test (discussed above) moving expenses must be incurred within a reasonable time from commencement of work.  In general, moving expenses incurred within one year of commencement of work are considered reasonable and are allowed as a nontaxable reimbursement. 

Under rare circumstances the IRS may allow moving expenses beyond the one-year period (up to 18 months) to be nontaxable if facts and circumstances of your case existed that prevented you from incurring the moving expenses within the one-year period.

Examples of allowable moving expenses beyond the one-year period:

  • Transoceanic moves
  • Moves when part of the expenses were incurred within the one-year period and the remaining were incurred within 18 months, such as if you started work and moved part of the household  however a family member remained at your prior residence for medical or educational purposes and moved at a later time. 

May I obtain a moving advance?

Yes, the Moving & Relocation SPG addresses moving advances and the correct procedures to follow. 

Moving advances must be accounted for and reconciled timely, otherwise it is possible to experience withholdings from your compensation as repayment of the advance.

Do I need receipts?

Original receipts are required for every expense.  They are not optional. The receipt must be official in nature and include the following information:

  • (1) Name of Vendor (hotel, moving company, airline, etc.)
  • (2) Taxpayer Identification Number (EIN or SSN)
  • (3) Date of Service
  • (4) Description of Service
  • (5) Itemized Expense (accommodations, meals, laundry, telephone, etc.)

In order to be reimbursed, receipts must be turned in within a reasonable period of time.

What happens if the receipts are not available (lost, destroyed, etc.)?

Receipts are required for every expense.  If the expense is for lodging, rental car, moving company, airline, etc, you should contact the company and request a copy of the receipt.

If receipts are not available, any reimbursement will be taxable income.

Are credit card statements acceptable receipts?

Credit card statements are not sufficient and do not meet the IRS requirements of substantiation.

Tips paid to movers - Do I need a receipt?

You should obtain a receipt with the individual's name, date, location of service, and social security number.  Up to $50 may be nontaxable.  Any amount over $50 is taxable income.

What if I travel using my own vehicle?

If you use your own vehicle, you may submit either actual expenses or the standard mileage rate.  Actual expenses include gas and oil.  Accurate records must be kept and receipts submitted.  Repairs, maintenance, insurance and depreciation on the automobile are not reimbursable by the University.

If the standard mileage is used, the IRS sets a rate that is nontaxable.  The amount paid in excess of the IRS moving rate is taxable to you (i.e. the University currently pays 57.5 cents per mile; 19 cents is non-taxable as moving expense and the remainder is taxable).

The standard mileage rate is calculated to include gas, oil and normal use of your automobile.  You may not submit both the actual expense and standard mileage rate.

What if I take the long way so I can sightsee on the way to my new home?

Nontaxable moving expenses include traveling the most direct route.  Mileage and expenses incurred beyond the most direct route are considered personal and not reimbursed by the University.

If I pay for a babysitter/child care while house hunting or moving, is it a personal expense taxable to me as the employee?

This type of expense is personal in nature.  If a department chooses to reimburse this expense for new employees the Unit Administrator should contact HRRIS for payment options (it will be taxable income).

If relatives or friends help me move, are their expenses reimbursable?

This type of expense is personal in nature.  If a department chooses to reimburse this expense for new employees the Unit Administrator should contact HRRIS for payment options (it will be taxable income).

What if I get sick or injured during the move and need medical care, supplies or medication?

The Internal Revenue Code does not include medical expenses as moving expenses.  They are personal expenses.

What if I have two homes that I am moving from?

Moving expenses are from your old primary place of residence to your new place of residence.  If you incur expenses moving items from your summer cottage, for example, it is not considered your primary residence and is taxable income.

What if I need to make more than one trip?

Only one trip per family member is nontaxable.  The family members do not have to travel together.  Trips to your old home after the initial move are taxable income.

What if I have my office or laboratory moved?

Expenses incurred with moving your office or laboratory to the University of Michigan may be a business expense reimbursed through Concur.  Please contact Tax Resources for further guidance.

Pets

The reasonable cost of moving a pet is nontaxable as long as the pet is moving from and to the same household as the employee.  

Nontaxable reimbursements include:

  • Air Fare
  • Taxable reimbursements may include:
  • Pet carriers
  • Vaccines

What if it is cheaper to replace a household good than to move it?

The Internal Revenue Code does not include new purchases as qualified moving expenses.  If the unit reimburses you for the purchases in lieu of moving, it is taxable income.

Storage Expenses

Storage expenses are nontaxable if the household goods are stored less than 30 days.  If storage is greater than 30 days, the entire amount is taxable.

Miscellaneous Expenses Taxable to the Employee:

  1. Alcohol - Alcohol is not reimbursable by the University.
  2. Meals - Meals are taxable to the employee
  3. House Hunting Trip - Travel, food and lodging incurred prior to the move to secure living quarters is taxable.
  4. Temporary Lodging - Temporary lodging expenses incurred when the appointment date precedes the date the permanent living quarters are available is taxable.  Receipts are required for temporary lodging and must include the name of the landlord, federal identification number, dates, and amounts.  A copy of the lease is acceptable.