Moving Expense Tax Guide for US Expats
Moving expense deductions, employer reimbursements, Form 3903, and the TCJA suspension — what expats need to know
Current Rules (2025)
SUSPENDED 2018–2025 Moving Expense Deduction for Civilians
The Tax Cuts and Jobs Act (TCJA) of 2017 suspended the individual moving expense deduction (Form 3903) for most taxpayers from 2018 through at least 2025. The deduction was previously allowed for moves related to starting a new job. Under TCJA, civilian employees and self-employed individuals cannot deduct moving expenses on their federal return.
ACTIVE Military Exception
The TCJA suspension does NOT apply to active-duty US Armed Forces members (or spouses/dependents) who move pursuant to a military order. They can still deduct unreimbursed moving expenses on Form 3903.
TAXABLE 2018–2025 Employer Reimbursements
Under TCJA, employer-paid moving expense reimbursements are now included in taxable wages for civilian employees (shown on W-2, Box 1). Previously, employer reimbursements for qualified moving expenses were excluded from income. This changes the tax strategy for employer relocation packages significantly.
STATE LEVEL Some States Still Allow Deduction
Some US states did not conform to the TCJA federal suspension. States that may still allow the moving deduction include: California (conforms to pre-TCJA rules), New York (partially), and others. Check your specific state rules.
Post-2025 Outlook
The TCJA provisions are set to expire after December 31, 2025. If Congress does not extend them, the moving expense deduction may be reinstated for 2026 and beyond. Watch for legislative developments. The current Tax Cuts and Jobs Act extension debates in 2025 Congress sessions are ongoing.
Employer Relocation Package — Tax Calculator
Even though you can't deduct moving expenses, you can plan your employer reimbursement strategically.
What Was Deductible Pre-TCJA?
For reference and for military personnel still eligible — "qualified moving expenses" included:
- Cost of moving household goods and personal effects
- Travel costs to the new home (not meals, not house-hunting)
- One trip per family member (not multiple trips)
- Required: move is closely related to start of work at new location
- Distance test: new job must be ≥50 miles further from old home than old job
- Time test: 39 weeks of full-time work in 12 months following move
Relocation Package Analysis
Negotiating Your Package
✅ Ask Employer For
- Full tax gross-up on relocation payment
- Lump-sum flexibility (spend as needed)
- Housing transition allowance (1–3 months)
- School search / education support
- Spouse/partner job search assistance
- Cultural transition coaching
⚠️ Watch Out For
- Clawback clauses (if you leave early)
- Tax gross-up not offered — ask!
- Currency risk on lump sums
- Package offered in local vs USD
- Timing of payment vs tax year
A "gross-up" means your employer increases the payment by enough to cover the tax. Example: you receive $25,000 relocation payment; at 22% marginal rate, tax = $5,500. A full gross-up would pay you $25,000 ÷ (1 - 0.22) = $32,051. The $7,051 extra covers your federal income tax. Ask your HR/employer explicitly — many companies offer this but won't volunteer it.
State Considerations
California did not conform to TCJA on moving expenses. CA residents may still be able to deduct qualified moving expenses on their CA state return. If you're moving TO California, employer reimbursements may also be excluded from CA income under the old rules. Consult a California tax advisor.