What You Need To Know About How Moving Affects Your Taxes

If employer-paid relocation expenses were part of the offer for your new job, you might be surprised to learn how that can be reflected in your taxes and even your first paychecks. Moving for work used to be tax-deductible, but that ended for most filers starting with the 2018 tax year. 

Much of the advice still online was written before that change, which is one reason so many people are surprised by the result when they file their taxes.

If you’re planning a local, long-distance, or international move, you’ll want to know the ins and outs of what you might experience as you go through the process. If you have specific questions, consider reaching out to a tax advisor. But in the meantime, here are some things to discuss with your employer and tax preparer before and after your move.

Can You Still Deduct Moving Expenses?

Most people can no longer deduct moving expenses from their federal taxes. The Tax Cuts and Jobs Act first suspended the federal moving expense deduction, and the One Big Beautiful Bill Act made that permanent. 

Per IRS guidance on moving expenses, the two groups who can still deduct moving expenses are active-duty service members moving under military orders, and beginning in 2026, certain intelligence community employees and appointees.

State returns are a separate question. For example, beginning with the 2026 tax year, Massachusetts allows qualifying taxpayers to deduct moving expenses. California also has its own deduction, form, and distance and work requirements.

If you’re moving to a state that allows relocation expenses to be deducted, bring it up with your tax preparer.

Why Your Relocation Package May Be Taxed

Before 2018, an employer could reimburse qualified moving costs and leave them out of your wages for federal tax purposes. That exclusion ended alongside the deduction.

For the most part, how you receive the relocation expense doesn’t matter. A lump sum wired to you, a reimbursement against receipts you turned in, or an invoice the moving company sends straight to your employer are all generally counted as wages. It will show up on your W-2 and get income and payroll tax withheld.

This means your employer can spend serious money on your relocation without a dollar ever touching your bank account, but the tax will still show up in your paycheck.

Some employers gross up the benefit, meaning they pay more than the actual expense to cover the tax the relocation payment creates. If you aren’t sure if your company does, ask HR about it before you sign anything. You’ll want to ask whether the benefit is grossed up and at what rate, whether it comes as a lump sum or a reimbursement against actual costs, and when it hits payroll. 

What Active-Duty Service Members Should Know

Active-duty service members can still take a deduction, which is reported on IRS Form 3903 and on Schedule 1 of the 1040. The move must be tied to a military order and incident to a permanent change of station, which covers the move to a first post of active duty, a move between permanent posts, and the move home after active duty ends, within a set window.

Qualifying costs generally include transportation of household goods and personal effects, storage related to the move, and travel and lodging for the move to the new home. Meals don’t count. Anything the government paid for directly, or reimbursed without adding it to your income, can’t be deducted. 

As with any financial record, you’ll want to keep the orders, the weight tickets, the storage agreements, and receipts for anything you paid out of pocket. Then confirm the details with a tax professional or a military legal assistance office before you file.

What This Means for Your Moving Budget

If your employer is covering the move, find out early whether the benefit is grossed up, then treat whatever’s left as a real line in the budget. If you’re paying your own way, keep clean records anyway. Invoices, inventory documentation, and storage agreements cost nothing to hold onto, and they give a tax professional something to work with, especially if you moved to a state that has its own deduction.

While most people won’t be able to claim a deduction, understanding how relocation money is taxed may still be worth your time. It can be reflected in your early paychecks, for example, which likely isn’t something you want to be surprised by.

Let Olympia Handle Your Move

Having an early conversation with your company and a tax professional about your moving expenses and how they might show up on your taxes and paychecks can help you better plan for your financial future.

To reduce your stress, save time, and keep your relocation on track from start to finish, call Olympia Moving. Move360™ by Olympia is our full-service moving program designed to handle every phase of a residential relocation. This includes packing, specialty item handling, and local, long-distance, and international moves, with full-service storage available. 

Contact us online or call us at (888) 983-4830, and we’ll walk through what your move needs.