What Counts as Relocation Expenses Under IRS Rules

Under IRS rules, relocation expenses cover only two things: the reasonable cost of moving your household goods and personal effects from your old home to your new one, and the reasonable cost of traveling (including lodging) between the two residences.¹ Everything else you spend to relocate falls outside the federal definition, no matter how necessary the cost feels. And since the One Big Beautiful Bill Act of 2025 made the Tax Cuts and Jobs Act suspension permanent, only active-duty military members moving on permanent change of station orders and certain intelligence community employees can actually deduct these expenses on a federal return.²

The Two Categories the IRS Recognizes

The federal statute at 26 U.S.C. § 217 draws a hard line. Qualifying moving expenses are limited to transporting your belongings and getting yourself and your household to the new home. Nothing else.¹

The first bucket covers the physical move. Furniture, appliances, clothing, kitchenware, books, and anything else you own that has to travel. Packing materials and professional packing labor both belong here. Boxes, tape, bubble wrap, packing paper, and specialty crating for fragile items all count as part of the cost of moving household goods.

The word “reasonable” carries weight in the statute. Federal regulations clarify that only expenses reasonable under the circumstances of a particular move qualify. Spending several hundred dollars on custom crating for a valuable antique is reasonable. Chartering a private jet to avoid a day of driving is not.³ The IRS doesn’t publish a price cap; reasonableness is judged case by case.

The second bucket is travel. Airfare, bus tickets, train fares, and driving expenses for you and members of your household. If you drive, the IRS sets a standard mileage rate for moving purposes of 20.5 cents per mile for 2026, and that rate applies only to the filers who still qualify for the deduction.⁴ Instead of the flat rate, you can track actual out-of-pocket costs for gas and oil. General maintenance, insurance, and depreciation on the vehicle are not deductible either way.⁵

Lodging along the route qualifies for multi-day trips, but the trip has to follow the shortest commonly traveled route. Scenic detours, stopovers, and side trips generate costs that are not reasonable and won’t be covered.³

Meals are explicitly out. The statute says it plainly: moving expenses “shall not include any expenses for meals.”¹ That catches people off guard on cross-country drives, where food adds up quickly.

Who Can Still Deduct Relocation Expenses

The Tax Cuts and Jobs Act suspended the moving expense deduction for civilians starting in 2018. That suspension was set to expire after 2025, but P.L. 119-21 (the One Big Beautiful Bill Act) made the elimination permanent.² Two groups can still take the deduction:

Active-duty members of the Armed Forces who move under a permanent change of station order.
Certain employees and appointees of the intelligence community who relocate due to a change in assignment.¹

If you’re in one of those groups, you report the deduction on IRS Form 3903.⁶ Two eligibility tests originally applied to all filers and still shape how the IRS evaluates qualifying moves. The distance test requires your new workplace to be at least 50 miles farther from your old home than your previous workplace was. The time test requires at least 39 weeks of full-time work in the new area during the first 12 months after the move, or 78 weeks over 24 months if you’re self-employed.⁷ Military members with PCS orders are exempt from both tests.

State law is a separate question. Roughly seven states, including some of the largest by population, still allow a state-level moving expense deduction that mirrors the old pre-2018 federal rules. If you’re filing in one of those states, the deduction could save real money even though the federal break is gone. Check your state’s income tax instructions or consult a tax professional.

How Employer Reimbursements Are Taxed Now

Many employers still pay for or reimburse moving costs as part of a job offer, but the tax treatment changed permanently in 2025. Any moving expense reimbursement your employer provides is taxable wages, reported on your W-2 and subject to income tax and payroll withholding. The One Big Beautiful Bill Act eliminated the exclusion for qualified moving expense reimbursements, which had been suspended since 2018 and was scheduled to return in 2026.² The only exceptions are reimbursements paid to active-duty military members moving under PCS orders and certain intelligence community personnel.

To offset the tax hit, some employers add a “gross-up” payment: extra money calculated to cover the taxes the reimbursement itself generates. If your employer reimburses $5,000 for moving costs, a gross-up might bring the total payment to roughly $7,500 so that after withholding, you still net the intended $5,000. Not every employer offers this, and the amount depends on your tax bracket. If your offer letter includes relocation assistance, ask specifically whether the benefit is grossed up. A $10,000 relocation package that isn’t grossed up could leave you with $6,500 to $7,000 after taxes.

Federal employees follow a separate framework. The General Services Administration publishes detailed matrices specifying which closing costs, home sale expenses, and relocation charges are reimbursable and at what rates.⁸ Government contractors work under the Federal Acquisition Regulation, which caps combined closing costs and continuing ownership costs at 14% of the sale price of the old home.⁹

Storage and Carrier Valuation Under the IRS Definition

Short-term storage sometimes qualifies, but the rule is tight. For domestic moves, storage charges only count as a moving expense if they’re incurred during the transit of your goods. Storage that extends beyond what’s needed to get your shipment from one home to the other falls outside the federal definition. Foreign moves get more flexibility: the statute allows storage expenses for the entire period the overseas location remains your principal place of work.¹

Carrier valuation coverage is the other item worth understanding, because it lives inside the cost of moving household goods. Federal law requires interstate movers to offer two levels of coverage. The baseline, Released Value, caps the carrier’s liability at 60 cents per pound per item. A 50-pound television worth $1,500 would get you $30 if it’s destroyed. Full Value Protection requires the carrier to repair, replace, or pay the current market value for lost or damaged items; the cost varies by carrier and may include deductible options.¹⁰ The underlying federal authority at 49 U.S.C. § 14706 establishes replacement value as the carrier’s default maximum liability unless the shipper waives Full Value Protection in writing.¹¹

Costs the IRS Specifically Excludes

The list of costs the IRS will not recognize as moving expenses is long, and several items on it surprise people every year. The following are explicitly excluded:⁵

Buying or selling a home, including closing costs, mortgage fees, points, real estate taxes, home improvements made to help sell, losses on the sale, and any part of the purchase price of the new home.
Lease costs, including expenses for entering into or breaking a lease, and security deposits (including deposits forfeited because of the move).
Meals, at any point during the move, regardless of how long the trip takes.
Return trips to your former home after you’ve moved.
Vehicle registration fees and new driver’s licenses in the destination state.
Storage charges that aren’t incurred in transit, with the foreign-move exception noted above.
Furniture or goods purchased on the way to your new home.
Alterations to carpet, draperies, or other items to fit the new home.
Losses from giving up club memberships you can’t transfer.

Some employer relocation packages voluntarily cover items on this list. Lease-break penalties and temporary housing are common corporate benefits. But the employer’s reimbursement for those costs is taxed as ordinary wages.

Costs to Budget For Even Though They Don’t Qualify

Because the IRS definition is narrow, most of what you actually spend to move is out-of-pocket unless an employer picks it up. Renters commonly face lease-break penalties running one to two months of rent. Utility activation and disconnection fees typically range from $25 to $100 per service, and some providers require a deposit of a few hundred dollars before they’ll turn on service at a new address.

Homeowners face steeper transition costs. Closing costs on the sale of the old home and the purchase of a new one can total 5% to 10% of each transaction. Title transfer fees, inspection costs, and mortgage origination charges stack on top of one another. None of that is deductible under Section 217.

Vehicle shipping and pet transport also sit outside the IRS definition of moving household goods and personal effects. Auto transport costs scale with distance. Pet relocation is one of the most variable moving costs: a short ground transport for a small pet within the same state might run a few hundred dollars, while shipping a large dog cross-country by air can run $2,000 to $5,000 or more. Employer relocation packages sometimes cover these, but there’s no federal tax deduction for civilian movers.

A cross-country relocation for a family of four can easily cost $10,000 to $20,000 once you add professional movers, travel, vehicle transport, lease penalties, utility setup, and the small charges that accumulate between the old front door and the new one. Knowing which slice of that is deductible under federal law, which is reimbursable by an employer (and taxed when it is), and which comes straight out of pocket is the difference between a smooth transition and a financial surprise.

1
Office of the Law Revision Counsel. 26 USC 217 – Moving Expenses
2
IRS. 2026 Publication 15-B – Employers Tax Guide to Fringe Benefits
3
eCFR. 26 CFR 1.217-2 – Deduction for Moving Expenses
4
IRS. 2026 Standard Mileage Rates
5
Internal Revenue Service. 2025 Instructions for Form 3903 – Moving Expenses
6
Internal Revenue Service. About Form 3903, Moving Expenses
7
Internal Revenue Service. Form 3903 Instructions
8
U.S. General Services Administration. Reimbursable Relocation Expenses and Rates
9
Acquisition.GOV. FAR 31.205-35 Relocation Costs
10
Federal Motor Carrier Safety Administration. Understanding Valuation and Insurance Options
11
Office of the Law Revision Counsel. 49 USC 14706 – Liability of Carriers Under Receipts and Bills of Lading