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Qualified Moving Expense Reimbursement
A qualified moving expense reimbursement is any payment by an employer for expenses that would be deductible as moving expenses by the employee under IRC Section 217 if the employee had paid or incurred the expenses. Such qualified moving expenses under IRC Section 217 include the reasonable costs of travel to the new residence from the old residence and transportation of household goods and effects (below).
Under Section 217, there are three tests to be met by a qualified moving expense: (1) the work commencement test; (2) the distance test; and (3) the time test.
Work Commencement Test - First, the move must be closely related to the start of work both (a) in time and (b) in location.
Moving expenses incurred within one year from the commencement of work at the new location are closely related in time. If the move is not taken within one year from the date of commencement of work, the employee must show that circumstances prevented the move within that time, such as delaying the move to allow children to complete the school year.
Moving expenses are closely related in location to the start of work if the distance from the employee's new home to the new job location is not more than the distance from the former home to the new job location. If this requirement is not met, the employee can still meet this test by showing he/she is required to live at the home as a condition of employment or the employee will spend less money or time commuting from the new home to the new job location. Home is defined as the employee's principal home.
Distance Test - Second, to be a qualified moving expense, the new principal place of work must be at least 50 miles farther from his/her former residence as compared to the distance from the old residence to his/her former place of work. If the employee did not have a former place of work, the new principal place of work must be at least 50 miles from his former residence.
Time Test - Third, during the year (12 months) following the employee's arrival, he/she must be a full time employee during at least 39 weeks. The employee does not have to work for the same employer for all 39 weeks, but must be within the same general commuting area, and the 39 weeks do not have to be consecutive.
Non-Taxable Moving Expenses
Reimbursement of these costs is not taxable.
Travel to the New Residence
Costs for the travel to the new residence should be calculated by the shortest, most direct route available by conventional transportation. Additional expenses for stopover or side trips are not included. Such costs include lodging for the employee and members of the household for one trip from the employee's former residence to his/her new residence. Expenses for the day of arrival are included, as well as any lodging expenses in the former home's area within one day after the employee could no longer live in the former home because furniture had been moved. If the employee travels by car, expenses can be calculated by actual expenses kept by an accurate record or the IRS standard mileage rate. The IRS at the beginning of each calendar year provides this mileage rate. Any reimbursement of meals shall be included as taxable income. (Top)
Transportation of Household Goods and Effects
Costs for the transportation of household goods and effects include packing, crating, and transportation. If the employee's car is used, expenses can be calculated by actual expenses kept by an accurate record, or the IRS standard mileage rate.Costs of the required connecting or disconnecting of utilities and costs of shipping the employee's car or household pets are also included. In addition, the cost of moving household goods and personal effects from another location other than the employee's former home can also be included but are limited to what the cost would have been for moving these items from the former home. Finally, the costs of storing and insuring household goods and personal effects within 30 consecutive days after the day the employee's things are moved from the former home and before they are delivered to the new home are included. (Top)
Taxable Moving Expenses
The following expenses are taxable if reimbursed: the purchase price of new home, car tags, driver's license, expenses of buying/selling home, expenses of getting/breaking a lease, home improvements to help sell home, loss on sale of home, loss from disposing of club memberships, meal expenses, mortgage penalties, house-hunting expenses, real estate taxes, security deposits, temporary living expenses, and storage charges, except those incurred in-transit and for foreign moves.