A relocation allowance can cover moving expenses while also affecting an employee's taxable pay. The distinction matters when a household calculates how much of the package will be available to spend.
Tax treatment of moving benefits
Yes. For almost everyone, money an employer pays or reimburses for a move counts in the employee's income, and the moving expense deduction that used to offset it is not available.
Two groups are excepted.
What the IRS says about the deduction
The IRS states it plainly in Tax Topic 455: "If you're a member of the Armed Forces on active duty, you may be eligible to deduct unreimbursed moving expenses or exclude reimbursed moving expenses." That page was last reviewed on September 24, 2026.
The IRS draft instructions for the 2026 Form 3903 add a second group. Under What's New: "Moving expense deduction expanded to include members of the intelligence community. For tax years beginning after 2025, you can deduct moving expense if you are a member of the intelligence community who moves due to a change in assignment that requires relocation." The form's purpose section lists the same two groups and no others.
That document is a draft, dated August 27, 2026, but the rule it describes is already in the Code: 26 U.S.C. 217(k)(2) treats a member of the intelligence community who moves because of a change in assignment the same way as an active duty member of the Armed Forces.
The exclusion is a separate thing, and it is gone
Two different rules are easy to run together. One is whether you can deduct what you spent. The other is whether what your employer paid has to show up in your income at all.
On the second, the IRS draft of Publication 15-B for 2026, the employer's guide to fringe benefits, says Public Law 119-21 "permanently eliminates the exclusion for qualified moving expense reimbursements from your employee's income," for tax years beginning after 2025. The same two groups keep it: a member of the Armed Forces on active duty who moves because of a permanent change of station due to a military order, and an employee or new appointee of the intelligence community who moves pursuant to a change in assignment which requires relocation.
The final 2026 edition of Publication 15-B, read October 27, 2026, says the same, and the Code itself, 26 U.S.C. 132(g)(2), carries the two exceptions.
What that does to a relocation package
It changes what the package is worth, not whether you should take it. A package quoted as a dollar figure for the move is quoted before tax. The question to ask the employer is whether the package also covers the tax on the benefit, and whether a lump sum or a direct payment to the movers is what you are being offered.
Those are terms in your offer. Ask them in writing before you sign anything on a house.
What it does not change
Account for the after-tax relocation benefit when preparing the moving budget. It is separate from the purchase price and from the tax consequences of selling the current house, so confirm each item rather than treating the employer's payment as the total available to spend.
Establish the tax treatment while planning the move, so the amount available from the relocation package is clear before other commitments are made.
What any of this does to your return belongs to your CPA. What your package covers belongs to your employer and the relocation administrator they use.
The notes on what a relocation package covers and on renting first in a new town cover the rest of an arriving move, and the executive relocation page covers how that work is run.
Sources: IRS Tax Topic 455, Moving Expenses, last reviewed September 24, 2026; the IRS draft 2026 Instructions for Form 3903, draft dated August 27, 2026; and the IRS draft Publication 15-B for 2026, Employer's Tax Guide to Fringe Benefits, draft dated December 5, 2025, citing Public Law 119-21. Read at source, October 5, 2026. Rechecked October 27, 2026: the final Publication 15-B (2026) at irs.gov, and 26 U.S.C. 132(g) and 217(k) at law.cornell.edu. The Form 3903 instructions are still a draft.
This note is general. It is not tax or legal advice. What applies to your move depends on your situation and on the year it closes.