31 Aug Are Moving Reimbursements Taxable?
Whenever a minister or other church employee relocates to begin a new position, the question of moving expenses commonly arises. The assumption routinely made by both the transitioning employee and the new employer is that the church can help pay moving expenses as an incentive and as assistance for a new hire to relocate.
For many years the law did allow for certain moving expenses to be reimbursed as a non-taxable event to assist a new employee in relocating to being a new position. However, this is no longer the case under current tax law. Reforms passed in late 2017 eliminated the moving deduction beginning with the tax year 2018 and going forward.
This does not mean that a church cannot help with such expenses. What it does mean is that any amount that a church pays to help an employee move is deemed taxable income for the employee. This is true whether the expenses were paid directly by the church to a vendor such as a moving company, truck rental company, or hotel, or if the church reimbursed the employee for expenses paid by the employee. The church cannot prevent moving expenses from being taxable income merely by paying those expenses directly. Any money provided by the employer in any form for the purpose of moving expenses should be reflected as taxable income on the employee’s Form W-2. If an employee receives moving reimbursements that does not appear on the employee’s W-2, the employee should still report such payment as taxable income. For planning purposes, both the church and the employee should keep in mind the tax implications of any moving expenses paid by the employer.
Moving expenses generally do not qualify as housing allowance expenses for clergy, either. Some of the expenses incurred in setting up a new household may qualify to be included within a housing allowance, such as furniture, supplies, and initial utility set-up expenses. However, the specific costs of moving, such as the costs of hiring movers, renting moving trucks or trailers, and traveling from a previous home to a new home, are not the kind of expenses that can be included in a housing allowance designation.
Original content by clergyfinancial.com. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.