Are the Reimbursements for the Closing Costs for a Relocation Taxable Income?

Moving reimbursements may not be income but closing reimbursements are.
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Moving, for any reason, isn't cheap. There's your new home, the cost of shipping your goods or buying new stuff, the cost of getting your family and yourself there -- it all adds up. However, you can write off some of the bills on your taxes if you are relocating for employment purposes. If your employer reimburses you for the move, some of that money is tax-free. Reimbursements for closing costs on your new home are, however, taxable income.


Moving expenses are deductible if your new job is at least 50 miles further from your old home than your old job. If it's your first job or you formerly worked from home, the new office must be at least 50 miles from your house. You usually have to make the move within a year of getting the job, and you must work full-time at least 39 weeks of the year after you move. If you don't meet these standards, your expenses aren't deductible and your reimbursements are all taxable.


You can write off the cost of moving yourself, your family and your possessions to your new home, but not the cost of buying a new house. Likewise, reimbursements for moving, not buying, are the ones that get a tax exemption. It's not guaranteed, either: you get to exclude reimbursements from income only if your employer has an accountable plan set up to pay for them. If there's no plan, the reimbursements go on your W-2 as income, and you pay tax on them.


The reimbursement plan is accountable if you track your expenses, report them to your employer and return any reimbursement that's more than you spent. Usually you have to report the expenses within 60 days and make returns within 120. If you meet the requirements, your reimbursements are tax-exempt. If your employer has an accountable plan but lets you keep excess reimbursements, you pay tax on the excess money only.


If your employer reimburses you for closing costs, the money shows up on your W-2, where it's included as part of your wages. Moving cost reimbursements under an accountable plan show up in a separate box; any other reimbursements are wages. You can't take a deduction for any moving expenses your boss reimburses. If the reimbursement doesn't cover all your expenses, you can take the write-off for whatever costs aren't covered. Keep receipts for the costs, so you can prove your expenses to the IRS if necessary.

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