Relocation Expense Payments

NEW! Under the Tax Cuts and Jobs Act of 2017, the personal deduction for relocation expenses and the exclusion from income of employer-paid relocation expenses are suspended from January 1, 2018 through December 31, 2025.  As a result, all moving expenses incurred on or after January 1, 2018, whether reimbursed to an individual or paid to a vendor on behalf of an individual, are taxable income to the individual.

General Rules for Relocation Expenses

Relocation expenses include moving expenses and house hunting expenses. They do not include recruiting expenses or business travel expenses. Relocation expenses, whether reimbursed to an individual or paid to a vendor on behalf of an individual, are taxable income to the individual. See Definitions link at the bottom of this page for definitions of italicized words.

Any expenses a department agrees to pay and for which the appropriate departmental approvals have been obtained are allowable; however, departments should use discretion when agreeing to pay for or reimburse certain expenses. The following list of relocation-related expenses is provided as a general guideline for what are deemed “reasonable” and “unreasonable” relocation expenses.

Expenses commonly associated with relocation include, but are not limited to:

• Travel of household members to the new location. The cost of traveling from the former home to the new home should be by the shortest, most direct route available by conventional transportation. It does not include return trips or multiple trips between the former home and the new home;
• Moving company, including loading and transport;
• Moving truck or van rental and related fuel charges;
• Transportation of vehicles;
• Temporary storage of household items (30 days or less);
• Mileage incurred on the employee’s vehicles for transportation to the new location. When reimbursing employee relocation mileage expenses, departments may use any rate deemed reasonable. In the past, the determination of the value of the relocation rate by the IRS was consistent over time with the medical mileage rate. As a best practice, it is recommended that the medical mileage rate in effect at the time of the move be used. However, note that regardless of rate used, all relocation mileage reimbursements are taxable income to the employee. Mileage rates are available at: https://financialservices.wustl.edu/wfin-topic/expenses/mileage-rates/reimbursement-rates/.

Expenses that are generally considered beyond the scope of relocation expenses include, but are not limited to:

• Trips between the old home and the new, other than the actual move to the new residence;
• Any expenses of buying or selling a home (including home improvements, loss on the sale, real estate taxes, any part of the purchase price of a new home, closing costs, mortgage fees, inspections, et al);
• Expenses of entering into or breaking a lease;
• New state registrations (including car tags, driver’s licenses, occupancy permits, et al);
• Real estate taxes;
• Long term storage charges (greater than 30 days);
• Security deposits (including any given up due to the move).

Relocation expenses may be reimbursed to an individual or paid to a vendor on behalf of an individual. Those paid to third parties on behalf of an individual may be paid via Purchase Order, Supplier Invoice Request, or Procurement Card. Note, however, that expenses paid on behalf of the employee are still taxable to the employee under IRS relocation rules. As a result, payment to third parties must be reported as relocation expenses and will be included in the employee’s wages. See Procedures for Relocation Expenses below for how to report.

At the hiring department’s discretion and cost, taxes owed by the employee on third party payments may be reimbursed. Reimbursement of taxes owed is also known as “grossing up.” Contact the Payroll department for assistance with the calculation of the gross up amount.

Relocation expenses do not include relocation bonuses for which no receipts or substantiating documentation is required by the department. See Definitions section below. Relocation expenses include moving expenses and house hunting expenses. They do not include recruiting expenses or business travel expenses. See Definitions section below.

For the full Relocation Expense Guide click here.

---