If my employer paid my moving expenses but the costs were added to my W-2 income, can I deduct the expenses -- or can I only if I first paid the expenses?

Forum|Forum|6 years ago
June 1, 2019
5 replies
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I'm unclear whether to deduct the moving expenses since I didn't pay them -- yet my W-2 income was increased (though it was grossed-up, as my employer paid federal and state taxes as well).

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Best answer by bwa

As noted above, you do deduct those that are deductible. By including them in your income you are deemed to have paid them, even though you didn't actually write the check. However, they have to be a deductible expense. A reimbursement for a non-deductible expense remains in income with no offsetting deduction. Moving expenses are limited to -

the cost of transportation of your household goods and family effects,
travel costs (including lodging but not meals) of you, your spouse and your dependents while enroute
the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home. (Different storage rules apply to a foreign move.)

You cannot deduct the following items as moving expenses.

Any part of the purchase price of your new home.
Car tags.
Driver's license.
Expenses of buying or selling a home (including closing costs, mortgage fees, and points).
Expenses of entering into or breaking a lease.
Home improvements to help sell your home.
Loss on the sale of your home.
Losses from disposing of memberships in clubs.
Mortgage penalties.
Pre-move house hunting expenses.
Real estate taxes.
Refitting of carpet and draperies.
Return trips to your former residence.
Security deposits (including any given up due to the move).
Storage charges except those incurred in transit and for foreign moves. "In transit" includes any 30 day period including the day of the move.
Temporary lodging at the new residence location

See IRS Publication 521 on moving expenses here: http://www.irs.gov/publications/p521/ar02.html#en_US_publink100043359

mhyzyAuthor

Employee

NJ doesn't allow you to deduct moving expenses, yet it looks like I can deduct if the expenses were included in my W-2. Should I deduct the expenses from Federal and NJ??

aaotb

Employee

Unless I misunderstand you and you are going to pay these expenses in the future...which I don't think you mean... as you didn't pay your expenses, you are not entitled to deduct them from either of your taxes. Most employers, however, gross up (add both the expenses PLUS the taxes the estimated additional you have to pay for the increase. You may not deduct anything that is not paid by you, your employer is entitled to the deduction. However any mileage or expenses you paid to get from your former residence,cleaning or moveout expense, packing expense, animal boarding, any reasonable expense which you paid, and BUT ONLY THOSE for which you were not and are not going to be reimbursed by your company may be deducted.

bwa

Employee

If your employer grossed them up and included them in your income then you are deemed to have paid them.

bwaAnswer

Employee

the cost of transportation of your household goods and family effects,
travel costs (including lodging but not meals) of you, your spouse and your dependents while enroute
the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home. (Different storage rules apply to a foreign move.)

You cannot deduct the following items as moving expenses.

Any part of the purchase price of your new home.
Car tags.
Driver's license.
Expenses of buying or selling a home (including closing costs, mortgage fees, and points).
Expenses of entering into or breaking a lease.
Home improvements to help sell your home.
Loss on the sale of your home.
Losses from disposing of memberships in clubs.
Mortgage penalties.
Pre-move house hunting expenses.
Real estate taxes.
Refitting of carpet and draperies.
Return trips to your former residence.
Security deposits (including any given up due to the move).
Storage charges except those incurred in transit and for foreign moves. "In transit" includes any 30 day period including the day of the move.
Temporary lodging at the new residence location

See IRS Publication 521 on moving expenses here: http://www.irs.gov/publications/p521/ar02.html#en_US_publink100043359

bwa

Employee

If the expenses your employer paid are on your W-2 you are deemed to have paid them. To the extent the payments were for deductible expenses, you can claim them as deductions on your tax return. (However, if handled correctly, the amount added to W-2 income should have only been for reimbursements of non-deductible expenses.)

mhyzyAuthor

Employee

So I'm confused, as I appear to have 2 seemingly conflicting answers. If I understand correctly user bwa says I can deduct, since the income was on my W-2, but user aaotb says I cannot since I did not pay the expenses myself. To clarify, my employer did gross-up the income added to my W-2, so they also did pay taxes. So do I not deduct since they paid taxes as well -- or do I deduct since my taxable income was increases due to the relo expenses? Thanks for clarifying!