The approaching summer season is often a time of transition. During this time of year churches frequently hire new employees who relocate to serve the church. Ministers and other church employees sometimes find new opportunities and make a change during the summer months, between school years. Coming out of the disruptions caused by COVID-19, many people may find themselves making changes that require relocating in the months ahead.
Whenever a minister or other church employee relocates to begin a new position, the question of moving expenses commonly arises. The assumption routinely made by both the transitioning employee and the new employer is that the church can help pay moving expenses as an incentive and as assistance for a new hire to relocate.
For many years the law did allow for certain moving expenses to be reimbursed as a non-taxable event to assist a new employee in relocating to being a new position. However, this is no longer the case under current tax law. Reforms passed in late 2017 eliminated the moving deduction beginning with the tax year 2018 and going forward.
This does not mean that a church cannot help with such expenses. What it does mean is that any amount that a church pays to help an employee move is deemed taxable income for the employee. This is true whether the expenses were paid directly by the church to a vendor such as a moving company, truck rental company, or hotel, or if the church reimbursed the employee for expenses paid by the employee. The church cannot prevent moving expenses from being taxable income merely by paying those expenses directly. Any money provided by the employer in any form for the purpose of moving expenses should be reflected as taxable income on the employee’s Form W-2. If an employee receives reimbursement for moving expenses that does not appear on the employee’s W-2, the employee should still report such payment as taxable income. For planning purposes, both the church and the employee should keep in mind the tax implications of any moving expenses paid by the employer.
Moving expenses generally do not qualify as housing allowance expenses for clergy, either. Some of the expenses incurred in setting up a new household may qualify to be included within a housing allowance, such as furniture, supplies, and initial utility set-up expenses. However, the specific costs of moving, such as the costs of hiring movers, renting moving trucks or trailers, and traveling from a previous home to a new home, are not the kind of expenses that can be included in a housing allowance designation.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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