Moving for a New Start? Why Your Moving Costs Are Probably Not Deductible

A move is often the second act of a life upheaval. You lost the job and found one three states away. You sold the house after the diagnosis to be closer to family. The storm made the old place unlivable. Moving costs money, and it is natural to look for help from the tax code.

Here is the straight answer: for most people, there is no federal deduction for moving expenses, and money an employer gives you for a move is generally taxable. Knowing that up front prevents an ugly surprise at tax time.

The deduction is suspended for most taxpayers

IRC Section 217 has long allowed a deduction for certain job-related moving expenses. But Section 217(k)(1) says that, except for individuals covered by Section 217(g), the section "shall not apply to any taxable year beginning after December 31, 2017." The current text titles the subsection "Suspension of deduction for taxable years beginning after 2017," with no end date.

Section 217(g) covers members of the Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station. Section 217(k)(2), added by Public Law 119-21 for taxable years beginning after December 31, 2025, extends the same treatment to employees and new appointees of the intelligence community, other than members of the Armed Forces, who move because of a change in assignment requiring relocation.

If you are not in one of those groups, your moving costs are personal expenses for federal income tax purposes. That includes the truck, the movers, the gas, and the hotel on the way.

Employer moving money is taxable

This is where people get hurt. A new employer offers a relocation package to get you to take the job. You assume it is a reimbursement, not income. It is income.

IRC Section 132(g) historically excluded a "qualified moving expense reimbursement" from income, meaning an employer payment for expenses that would be deductible under Section 217. Section 132(g)(2) now suspends that exclusion for taxable years beginning after 2017, except for members of the Armed Forces on active duty moving under a military order incident to a permanent change of station and, under the current text, employees or new appointees of the intelligence community.

So for everyone else, relocation payments are compensation. They show up as wages, and they are subject to income tax and generally to payroll taxes. If the employer does not withhold enough, you will owe the difference.

Watch the withholding

Relocation bonuses and lump-sum moving allowances are often paid as supplemental wages. IRS Publication 15 for 2026 says employers may withhold a flat 22% on supplemental wages identified separately from regular wages. If your marginal rate is higher, the flat rate leaves you short, the same problem I explain in how severance pay is taxed. Some employers "gross up" relocation payments to cover the tax. Ask before you sign whether the package is grossed up.

What moving can affect on your return

Even without a moving deduction, a move touches several tax issues:

• Your address of record. If the IRS does not have your new address, notices with deadlines go to the old one. See changing your address with the IRS.
• Selling your home. If you sell before meeting the two-year ownership and use tests because of a job change, health or unforeseen circumstances, you may still qualify for a partial exclusion of gain. See selling your home early because life changed.
• State taxes. Moving between states can mean part-year resident returns in both states. That is state law, not federal, but it can create balances if nobody planned for it.
• Withholding at the new job. A new Form W-4 at a new employer is a chance to fix under-withholding from earlier in the year.

For those who still qualify: what counts

If you are an active-duty service member moving under a permanent change of station order, or, beginning in 2026, an intelligence community employee or new appointee moving because of a change in assignment, the deduction is still available. Section 217(b)(1) defines moving expenses as only the reasonable expenses of moving household goods and personal effects from the former residence to the new residence, and of traveling, including lodging, from the former residence to the new place of residence. The statute says plainly that the term "shall not include any expenses for meals."

Section 217(b)(2) adds that expenses for someone other than the taxpayer count only if that person has both the former and new residence as their principal place of abode and is a member of the taxpayer's household. Military members should also look at the special rules in Section 217(g), which relax some of the limits that would otherwise apply.

Everyone else should read this section as a reminder of what is not available, not as a list of deductions to claim.

A move is not a reason to stop filing

One more practical point. Moves after a crisis often happen in the middle of tax season, or right after it. Returns get forgotten in the boxes. If you will be moving around the filing deadline, file the return or an extension before the truck comes, and make sure the return shows the new address if you know it. A missed return in a move year is an avoidable problem, and the failure-to-file penalty is the expensive one.

Records still matter

Even though you cannot deduct moving costs, keep records of the move. Receipts for home improvements made to sell the old house can matter for the gain calculation. Closing statements for both homes matter for basis and for the home sale exclusion. And if you are in the military or intelligence community, the moving expense rules still apply to you, so the receipts are deductible-expense records.

When the move follows a disaster

A move forced by a disaster raises different questions: casualty losses, insurance proceeds, and possibly the involuntary conversion rules. Those are covered in the disaster casualty loss deduction and insurance payouts after a disaster. The moving deduction suspension still applies to the cost of the move itself.

A worked example

After a layoff, a worker accepts a job 600 miles away. The new employer pays a $10,000 relocation allowance as a lump sum and withholds 22% for federal income tax. The worker spends $8,000 on movers and travel.

• The $10,000 allowance is taxable wages. Under Section 132(g)(2), the qualified moving expense reimbursement exclusion is suspended for this worker.
• The $8,000 of moving costs is not deductible. Section 217(k) suspends the deduction for non-military, non-intelligence-community taxpayers.
• If the worker's marginal rate is 24%, the 22% withholding leaves about $200 of federal income tax uncovered on the allowance, before considering state tax.

Not a disaster. But it is $10,000 of income nobody planned for, in a year that may already include severance and unemployment.

Questions to ask a new employer

1. Is the relocation payment a lump sum, a direct payment to the moving company, or a reimbursement?
2. Will it be grossed up for taxes?
3. How will it be withheld, and will it appear on my Form W-2?
4. Is there a repayment obligation if I leave within a certain time?

The bottom line

For most people, moving expenses are not deductible and employer moving money is taxable wages. The exceptions are active-duty military moving under a permanent change of station order and, beginning in 2026, certain intelligence community employees. Plan for the tax on any relocation package, update your address with the IRS, and look at the home sale rules if you are selling early.

New city. Same Internal Revenue Code.