How H.R. 1 Affects Moving & Relocation Tax Deductions

For a long time, moving for a new job came with a helpful tax perk. You kept your receipts for the moving truck, the boxes, and the travel, then deducted those costs from your income at tax time. It was straightforward, and most people took it for granted - a small but meaningful way to offset the real financial burden of picking up your life and moving somewhere new.

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Then came H.R. 1 - the Tax Cuts and Jobs Act - and that changed. For most American workers, that deduction is gone. If you're relocating for a promotion, a new opportunity, or an international assignment in the US, the tax rules you might have heard about no longer apply the way they used to. Understanding what's different and what still applies can save you from some genuinely unpleasant surprises when you file.

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Are Moving Expenses Tax Deductible After H.R. 1?

The short answer: for most people, no. Are moving expenses tax deductible right now? Unless you're an active-duty member of the U.S. Armed Forces, the answer is no for federal tax purposes. Congress suspended the moving expenses deduction for tax years 2018 through 2025. That means civilian employees and self-employed individuals can't deduct relocation costs from their income during this period.

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The one group that still qualifies is active-duty military members who move because of a military order or a permanent change of station (PCS). Members of certain U.S. Intelligence Community roles may also qualify in specific situations. For everyone else - office workers, remote employees, self-employed individuals, international assignees - the IRS closed that door.

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It's also worth noting that "suspended through 2025" doesn't mean it automatically comes back in 2026. Tax laws reflect legislative priorities, and there's no guarantee the deduction returns once the suspension period ends. If you file taxes in 2026 for the 2025 tax year, you're still under these H.R. 1 rules. For anyone planning a move - domestically or internationally - it's safest to assume you'll be paying for relocation entirely out of pocket, with no tax break to soften the cost.

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What Are Qualified Moving Expenses? (And When They Matter Now)

Even though most people can't use the deduction, it's still useful to know what are qualified moving expenses in the IRS's definition, because this list shows up in other places.

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Historically, the IRS tracked these costs using Form 3903. The definition covered the necessary expenses for transporting your belongings and yourself from your old home to your new one:

• Hiring a professional moving company
• Renting a truck and buying supplies
• Travel costs to your new location - gas or overnight lodging during the move
• Storage fees for your belongings for up to 30 days

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These costs matter for two reasons today. First, if you're active-duty military, these are exactly what you can claim - keep every receipt. Second, many companies use this same IRS list when writing their own relocation policies. When a company says they'll cover "qualified expenses," they're typically pointing directly to this IRS definition - so knowing it helps you understand upfront what your employer will and won't reimburse.

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A few things that have never been on this list: temporary housing, house-hunting trips, and real estate agent commissions. Those were never considered "qualified" by the IRS, and they definitely don't qualify now. Even so, it's a good habit to keep a detailed record of everything you spend during a move. It helps with your own budgeting and makes the reimbursement process much smoother if your employer asks for documentation. Some companies will cover costs beyond the IRS list under their own policy - but you need the receipts to claim them.

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Can You Deduct Moving Expenses on Your Taxes If Your Employer Pays?

This is one of the most common points of confusion, and it's important to get it right.

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Can you deduct moving expenses on your taxes if your company is covering the cost? No - and there's an extra wrinkle. The IRS now treats employer-paid relocation as taxable income. That's a significant change from how things used to work.

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When a company covers moving expenses paid by the employer, that money gets added to your W-2 as wages. If your employer pays $10,000 toward your move, that $10,000 shows up as income on your tax return. You'll owe federal income tax on it, plus Social Security and Medicare taxes, which can mean losing $2,500 to $4,000 of that benefit to taxes alone.

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It doesn't matter whether the company pays the moving company directly or transfers the money to your account - either way, the IRS counts it as income. At the end of the year, check your W-2 carefully. Look at Box 1 (wages) and see if your relocation benefit was included. If it were, you would owe taxes on the assistance you received. Many employees only discover this when they see an unexpected tax bill.

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This is a real shift from before H.R. 1, when employer-paid relocation was often excluded from taxable income entirely.

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Relocation Assistance Taxable: How Are Moving Expenses Taxed?

Because relocation assistance taxable rules are now in effect, a company-funded move can actually push your reported income higher for that year - sometimes into a higher tax bracket.

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So, how are moving expenses taxed in practice? When an employer gives you a lump sum for moving, they withhold taxes from it before it ever reaches you. If they offer you $5,000, you might only receive around $3,500 after tax withholding. That consistently surprises employees who planned their moving budget around the full amount - and then find themselves underfunded when the actual bills arrive.

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Some employers solve this with a "gross-up." That means the company calculates the tax you'll owe on the relocation benefit and adds that amount on top, so you walk away with the full figure you were originally quoted. It's a generous policy and not universal, but it's worth asking about. If you're in the middle of negotiating a relocation package for a new job, asking whether a gross-up is included is completely reasonable - and many employers expect the question.

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Even "in-kind" benefits count toward your taxable income. If the company books a flight for you, arranges temporary housing, or pays a moving company directly on your behalf, the value of all of those things increases your reported wages for the year. Keep a close eye on your pay stubs during the month of your move to see how your employer is reporting these benefits and make sure the figures line up with what was actually provided.

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Practical Checklist for Employees and HR (Post-H.R. 1)

For employees moving for work:

• Confirm your eligibility. Are you in the active-duty military? If so, save every receipt - you can still claim your deduction using Form 3903. Everyone else should skip this step.
• Check your W-2 carefully. At year's end, compare what your employer actually paid against what shows up in Box 1 as wages. If the numbers don't match what you expected, follow up with HR before you file.
• Ask about gross-up. If you're negotiating a new job offer that includes relocation, ask whether the company will cover the tax on your package. This is a completely normal thing to request - many HR teams have a standard answer ready.
• Budget for the tax hit. If there's no gross-up, set aside roughly 25-30% of your total relocation benefit to cover what you'll owe. Better to have it and not need it than the other way around.

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For HR professionals:

• Be upfront with new hires. Make sure employees understand their relocation package is taxable before they start building a moving budget around the gross figure. A quick conversation early on prevents real frustration later.
• Track all payments carefully. Whether you're paying vendors directly or reimbursing the employee, keep detailed records of every transaction. Accurate documentation makes year-end W-2 reporting much easier and protects the company in case of an audit.
• Update your relocation policy. If your company's policy documents still reference the federal moving expense deduction, it's time to revise them. The deduction is suspended for civilians, and employees deserve accurate information when they're planning a major life change.

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The rules around moving expenses have shifted significantly since H.R. 1, but they're not impossible to navigate. With a clear plan, honest communication between employees and HR, and a little preparation, you can move through the process without any unpleasant tax surprises at the end of the year.

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At Expat US, we help companies and their employees navigate every aspect of relocating to the United States, including guidance on expense management and the administrative steps that come with an international move. Book a call to see how we can support your next relocation.