Qualifying for Relocation


2018 Tax Law Update

Under the new 2018 tax law change, the relocation requirement for distance and time no longer applies, since there are no longer any deductions of moving expenses. However...


Has your Company Policy Changed?

Employers may still require you to satisfy the old IRS rule for various reasons, including the mileage rule that ensures you are moving an acceptable distance.

The following three instances were included in prior tax legislation in order to receive relocation benefits. They may still apply for your company, potentially along with additional rules.

  • Your move is related with the start of employment
  • Your move meets the distance requirement
  • You employment meets the time test

In rare circumstances you may be granted benefits without meeting these obligations, especially in small or mid-sized organizations. If you are moving without assistance from a company you will still need to satisfy these requirements to deduct expenses on your income taxes.

Reasons for Requirements

The requirements above follow the IRS ruling for reimbursement of moving expenses and are mandated by companies with formal relocation programs to comply with tax code. If your relocation does not meet all of these rules the move will be deemed taxable, causing hardship to you financially or substantially increasing reimbursement costs, assuming the company provides a gross-up on expenses.

Requirement Details

The following details apply in all situations, but may not cover additional requirements of your employer. There may be exceptions to these rules other than those noted below for military personnel, self-employed workers or survivors of a decedent (see IRS Publication 521).


1] Relation to the Start of Employment: There are two requirements to meet for the relation test.

Relation to location: your new home must be closer than your old home is to the new work location.

Relation to time: you must complete your relocation within one year of the date you start employment in your new location.

Exceptions to the rule: Exceptions to this rule may be allowed for several reasons. Case studies show, for example, that delaying a move for the sake letting your child finish school is permitted. Additionally, in major metropolitan areas you may be permitted to move further away from your new employment (than your old home was) if the time to commute is less or the cost of commuting is cheaper. 


2] Distance requirement: to qualify for the distance requirement your A] new work location must be more than 50 miles further than B] your current commute is to work. This means that if you currently commute 15 miles to work, your new job location must be at least 65 miles away.

IRS Distance Test for Relocation










Old commute = 15 miles          |         New commute = 65 miles . . . You Qualify!


See the Distance Worksheet in the Checklists and Forms section to run a quick calculation for your move. Note that this formula has no bearing on where your new home will be located, which is accounted for in the Relation to Start of Employment section.

Exceptions to the rule: There are no notable findings or supporting case law for an exception to this rule.


3] Time Test: you must work as a full time employee for at least 39 weeks of the year following your move to the new location.

Exceptions to the rule: exceptions to this rule may be allowed in several circumstances, including if you are severed in good standing from the company or relocate again during the 39 week time period.

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