Certified Relocation Professional (CRP) Practice Exam

What is the tax treatment for reimbursed moving expenses if they are included in the transferee's income?

1. They are taxed as personal income without deductions

2. They can be deducted according to maximum allowable expenses

3. They require emergency tax filing

4. They are only deductible if itemized

The correct answer is: They are taxed as personal income without deductions

Reimbursed moving expenses that are included in the transferee's income are taxed as personal income without deductions. This treatment means that when a transferee receives reimbursement for moving expenses, those reimbursements increase their taxable income, and they cannot deduct those moving expenses from their taxable income. Under the Tax Cuts and Jobs Act (TCJA), which took effect in 2018 and lasts through 2025, moving expense deductions have been eliminated for most taxpayers. As a result, the reimbursements for moving expenses are generally treated as wages or personal income and are subject to income tax. This taxation approach emphasizes the importance of understanding how moving expenses can impact an employee's overall tax liability, particularly during relocation situations. Knowing that these reimbursed expenses are treated as income helps both transferees and employers plan accordingly regarding tax implications.