Moves Like Jagger … But Is It Deductible? Taxation of Job Search and Moving Expenses

by Beth Nedrow

Job mobility is a fact. Employees are more mobile than ever – changing jobs multiple times in a career. When an employee transitions between jobs and incurs job search and moving expenses, are those expenses deductible? If the employer pays for them, is it taxable income? Here are a few tips.

Job search expenses like travel for interviews, printing resumes and the like used to be deductible by the employee, at least to some extent. Unfortunately, the 2017 TJCA removed the 2% miscellaneous itemized deduction starting in 2018, so employees can’t deduct these expenses anymore.

If the employer pays travel or other expenses to interview a prospective employee, that amount is deductible by the employer as an ordinary and necessary business expense. In addition, it is not reportable income to the employee. (See IRS Pub. 525 discussion of “Job interview expenses.”) So if the employer pays interview expenses directly, the employee gets the benefit of not having to incur the (nondeductible) expenses, and not having to include the amount in income.

Once the employee has landed the job, there may be additional moving expenses such as packing supplies or a rental van. Previously, the employee could deduct those expenses, and the employer could also reimburse or pay them without the employee incurring taxable income. But once again, the TJCA changed the landscape. Starting in 2018, moving expenses are not deductible by the employee. And – unlike the situation of interview expenses – the employee will have to recognize income if the employer pays them. Before 2018, companies had complicated moving reimbursement plans that required employees to account for expenses. Now, since it is all taxable anyway, many employers are resorting to a simpler administration such as a single lump sum allowance.