Moving expense reimbursement | Kent State University

Moving expense reimbursement

Certain moving expenses are excluded from income.  The exclusion provides a favorable benefit to the employee because the reimbursement will not be subject to income or Medicare taxes.  

Moving expenses are addressed in two Internal Revenue Code sections:  IRC§132(g) and IRC §217.  IRC §132(g) provides rules for employer reimbursements and IRC§217 allows individuals to deduct certain expenses. 

Under IRC §132(g), certain moving expenses are not taxable to an employee if:

  • The specific tests of IRC §217 are met and
  • The payment is made under an accountable plan

Five tests must be met under IRC §217:

  1. The individual must be an employee.
  2. The employee must incur the expenses.
  3. The expenses closely related to start of work at a new job location.  Generally, moving expenses need to be incurred within one year from the date the employee first reported to work at the new location.  Also, except in a limited number of cases, the distance of the job commute must not be longer than it was before the move. 
  4. The expenses are allowed expenses.  The costs of the actual move are excluded from income.  
  5. The time and distance tests must be met. 
    TIME TEST:  The employee must work full time for at least thirty nine weeks during the first twelve months after arriving in the general area of the new job location.
    DISTANCE TEST:  The move will meet the distance test if the new main job is at least fifty miles further from the former home than the former job location was from the former home.  For example, if the former job location was three miles from the former home, the new main job location must be at least 53 miles from the former home.

In order for a payment to be excluded from income, the payment must be made under what is called an “accountable plan.”   When an employee is reimbursed for expenses or receives an allowance to cover expenses, the reimbursement or allowance is not taxable IF certain conditions apply. 

  • There must be a business condition for the expenses;
  • The expenses must be in connection with the employee’s service and
  • The reimbursement must be for an expense the employee could deduct on his/her tax return
  • The employee must either substantiate or be deemed to have substantiated the expenses within a reasonable period of time.
    • Receipts and/or cancelled checks and invoices must show the nature and amount of the expense.
    • Reimbursements using standard mileage rates or per diem allowances are deemed substantiated when the employee makes an adequate accounting that includes the time, place, and business purpose of the expense.  The standard mileage rate for travel related to moving is lower than the business expense rate.  The rate can be found on the accounts payable travel page.  Employees always have the option of calculating the actual costs of using their vehicle rather than using standard mileage rates.
    • 60 days is considered a reasonable period of time for substantiating the expenses.
  • The employee must return to the employer amounts in excess of the substantiated expenses within a reasonable time.  120 days is considered a reasonable time frame for returning excess advances.

If moving expenses are not reimbursed in the same calendar year in which they are incurred, the reimbursement must be included in income unless the employee can show that the amounts have not been deducted.  The employee may deduct the moving expense on his or her tax return however the reimbursement will be subject to all taxes.   

Taxable vs. Nontaxable expenses

Examples of taxable and nontaxable moving expenses

Taxable  (ineligible moving expenses)

Nontaxable (qualified moving expenses)

House hunting expenses

Reasonable costs of moving household goods/personal effects from former home to new home.  This includes packing, crating, transporting, shipping car(s), shipping pet(s), storage & insurance for up to 30 consecutive days.  

Rent reimbursement or lease termination fees

Lodging while traveling one time from old home to new home

Re-usable equipment/supplies (locks and retaining straps

Packing tape, boxes, and other supplies

Temporary housing or living expenses

Airfare or car travel for actual move


Real estate expenses (buying/selling commissions or costs associated with a lease)

Parking fees, tolls

Moving building materials

Charges to disconnect and connect utilities

Expedited moving charges

Charges for moving household goods and personal items from a place other than the taxpayer’s former home up to the amount that would have been allowable if the goods were moved from the former home.

Moving costs for a second home or location to the extent those costs exceeded what it would have cost to move the belongings from the main home.


Alterations to furnishings


Tax Reporting by the university

All reimbursements will be included as taxable income on the employee’s W-2 form unless the payment is determined to be a qualified moving expense. 

Qualified moving expenses are excluded from income if the IRS requirements are met and appropriate documentation is submitted within a reasonable period of time.  The exact amount of taxable income will be determined following the reimbursement.  The total qualified moving expenses may be reported to the IRS for informational purposes only.

Ineligible moving expenses will be subject to taxation and included in the employee’s income within a reasonable period of time after payment.

Appropriate documentation includes receipts and completion of certain forms by the employee and the employee’s department.   Forms and documentation are required to be submitted even if the university pays the expense directly.

All reimbursements of qualified moving expenses become taxable unless the time and distance tests have been met prior to the termination of individual’s employment.   In the event the time test is not met, the individual may submit a signed statement attesting that the time test will be met.   The statement must be submitted to the tax manager prior to the issuance of the last payroll check.

A moving expense summary must accompany a Payment Request.  The moving expense summary must be submitted for payments made to the employee or to an outside vendor.  The reimbursement must be requested within a reasonable period of time after the expense is incurred (i.e. 60 days).


Termination of Employment

A newly-hired employee who leaves university employment before one year is required to reimburse the university one-half of the value of paid moving expenses through a deduction from that individual’s final paycheck. 

If the time test has not been met, any prior tax-free reimbursements will be taxed on the individual’s final paycheck unless the individual provides a signed statement indicating that the time test will be met.


  • Standard moving expenses – Expenses for moving household goods, furniture, clothing, appliances, books, and other personal property related to the individuals’ profession.  Expenses may include charges for packing, insurance, and disconnecting/connecting appliances.  Expenses also include boxes, packing tape, and other supplies. 
  • In transit expenses – Reasonable costs of relocating the employee and the members of the employee’s household  including transportation, lodging, parking fees, and tolls.
  • Qualified moving expense reimbursements – Payments that have met the IRS requirements and are excluded from income.  Qualified moving expense reimbursements include standard moving expenses and in transit expenses. If permitted to be reimbursed under this policy, shipping of automobiles and pets and storage and insurance for up to thirty consecutive days may be a qualified moving expense.
  • Ineligible moving expenses – Payments that are not eligible for exclusion from income. 

Any questions on the taxability and reporting of moving expenses should be directed to the university tax manager.

Please consult the Policy Register, Policy 7-02.6 for University rules regarding reimbursement for moving expenses of newly hired employees. 

The moving expense summary form (excel spreadsheet) may be found in the forms library on the accounts payable website. 

IRS Video - Moving Expenses