What Qualifies as Moving Expenses During an Employee Relocation?
Relocating an employee isn’t just about moving boxes from one place to another—it involves a wide range of costs that need to be carefully managed and, in some cases, reimbursed.
HR managers and business leaders often find themselves asking what qualifies as moving expenses and how can these costs be structured in a way that’s both fair to employees and compliant with tax regulations?
Understanding this distinction matters because relocation expenses can vary widely depending on the role, the destination, and the size of the move. Knowing what counts and what doesn’t helps you set expectations, avoid surprises, and create a relocation package that supports both your team and your bottom line.
What Are Qualified Moving Expenses?
The term “qualified moving expenses” is often tied to IRS relocation reimbursement guidelines. While tax laws have shifted over the years, the concept remains the same: some moving costs can be reimbursed directly by the employer, and others may not qualify.
For example, the IRS moving expenses reimbursed by employer rules previously allowed employees to deduct certain costs, though tax reform limited this benefit for most workers. That said, many companies still offer moving expense reimbursement as part of an average relocation package to stay competitive in attracting talent.
What Counts as Moving Expenses?
Qualified moving expense reimbursements typically fall into a few common categories:
- Transportation of household goods – packing, loading, shipping, and unloading furniture or personal belongings.
- Storage costs – temporary storage of goods when there’s a gap between moving out and moving in.
- Travel to the new location – airfare or mileage reimbursement for driving, along with lodging during the trip.
- Utility connection or disconnection – fees to shut down and set up basic services at the old and new homes.
These are considered standard relocation expenses, and many employers cover them either directly through a moving vendor or by reimbursing the employee.
Expenses That Usually Don’t Qualify
Not every cost tied to a move fits into the category of qualified moving expense reimbursements. Items like meals on the road, house-hunting trips, or real estate closing costs often fall outside what the IRS considers deductible. Still, companies sometimes include them in relocation packages as a perk, especially for higher-level roles or difficult-to-fill positions.
This is where hidden costs of employee relocation often appear. Employees may assume every aspect of their move will be covered, but the fine print can tell a different story. Outlining what’s included and what’s not prevents frustration later.
Structuring Reimbursement for Moving Expenses
Employers typically handle moving costs in one of two ways—direct payment to vendors or reimbursement after the fact. Reimbursement for moving expenses requires clear guidelines so employees know what receipts to keep and which costs will be approved. Without those rules in place, it’s easy for expenses to creep up or for employees to feel shortchanged.
Having a clear relocation policy also helps you stay consistent across departments. For HR managers, that consistency is just as important as the dollar amount being reimbursed. Employees appreciate transparency, and it keeps disputes to a minimum.
The Role of Taxes and Moving Expense Deductions
The idea of a moving tax deduction is less straightforward than it once was. For many employees, the ability to deduct relocation expenses on personal taxes no longer applies.
Military members remain an exception, but for the average employee, the deduction is off the table. That’s why companies often step in with qualified moving expense reimbursements to offset the financial hit and ensure a smoother transition.
This change makes employer support more valuable than ever. Covering the right expenses can mean the difference between an employee feeling taken care of and one who feels burdened by the move.
Building the Right Relocation Package
An average relocation package can range widely, depending on company size, industry, and role. Some organizations stick to covering the basics—transportation, storage, and travel—while others go further, paying for real estate assistance, spousal job support, or temporary housing.
The more thorough the package is, the more competitive it becomes in attracting and retaining top talent.
But offering more doesn’t always mean spending recklessly. By carefully defining what are qualified moving expenses and aligning them with both IRS guidelines and your own internal policies, you can strike the balance between financial responsibility and employee satisfaction.
Why It Matters for HR Leaders
Relocation is about supporting employees during a major life transition. When you make clear which expenses will be covered, you’re not just protecting your company’s budget—you’re showing employees that you value their time, energy, and well-being.
Relocation is stressful enough without the added uncertainty of unexpected costs. A transparent, well-structured reimbursement program allows employees to focus on their new role instead of worrying about out-of-pocket bills.
Final Thoughts
So, what qualifies as moving expenses? Think of it as the necessary, job-related costs tied directly to getting an employee and their household from one location to another. The IRS may define certain boundaries, but employers often go beyond them to create relocation packages that meet today’s workforce expectations.
By being clear about what counts as moving expenses, setting guidelines for moving expense reimbursement, and understanding the hidden costs of employee relocation, you give your organization an edge while supporting your team when it matters most.