When Congress passed H.R. 1, also dubbed the One Big Beautiful Bill Act, it brought more sweeping changes to the U.S. tax code. While most headlines focused on income tax brackets and corporate rates, professionals in the relocation and mobility industry had their eyes on something else: the fate of the moving expenses and relocation tax deduction.
Relocation taxes remain among workforce mobility’s most confusing and financially burdensome aspects. This issue is critical to the industry because how relocation costs are taxed can significantly impact a person’s willingness or ability to relocate for a new opportunity.
This blog explores the evolution of the relocation tax deduction, what H.R. 1 included, and what it means for anyone moving for work in 2025 and beyond.
The Evolution of the U.S. Moving Expenses Tax Deduction
The relocation expenses tax deduction has existed for decades. The moving expenses tax deduction was originally enacted in 1964 to help individuals cover the often significant out-of-pocket costs associated with relocating for employment. This deduction allowed qualifying taxpayers to deduct certain moving-related expenses from their income. Therefore, making relocation expenses tax-deductible made relocation more accessible, especially for middle-class workers.
That changed in 2017. Under the Tax Cuts and Jobs Act (TCJA), Congress suspended most taxpayers’ moving expenses tax deduction through the end of 2025. Only active-duty military members moving due to a military order could continue to claim it. This decision meant relocation expenses were no longer tax deductible for most U.S. workforce, even when an employer required moves.
Congress wrote the TCJA to lift the suspension of the moving expenses tax deduction on January 1, 2026. Still, many in the relocation, global mobility, and moving industries hoped the reinstatement would come sooner.
Lobbying For the Reinstatement of the Moving Expense Tax Deduction in H.R. 1
When Congress announced H.R. 1 in 2025 as part of the FY 2025 Budget Reconciliation package, the relocation industry viewed it as a potential vehicle to correct what many saw as a costly oversight: the continued suspension of the relocation tax deduction.
Major industry players — including Worldwide ERC, the International Association of Movers (IAM), and the ATA Moving and Storage Conference (ATAMSC) — coordinated their lobbying efforts. Their goal? Convince lawmakers to reinstate the bipartisan moving expense tax deduction and exclusion before 2026.
In June 2025, the three organizations sent a joint letter to the House Ways and Means Committee, urging legislators to amend H.R. 1 and bring back the deduction for private-sector workers. You can find the full letter here, but here’s a summary of its main points:
- Over 350,000 Americans relocate each year for work-related reasons.
- The workers most affected by the suspension are middle-income earners. 72% of those who claimed the deduction before 2017 earned under $100,000 annually.
- Treating employer-covered relocation costs as taxable income penalizes employees for taking a job transfer.
- The deduction supports talent mobility, essential for American businesses to stay competitive and for economic growth.
- Permanently eliminating the deduction could result in labor mismatches and added pressure on families asked to relocate.
The letter emphasized that lawmakers should not view relocation expenses tax deduction as a loophole or luxury but as a practical, narrowly tailored form of relief that reimburses costs, not adds income.
H.R. 1 (One Big Beautiful Bill Act) Does Not Reinstate the Moving Expenses Tax Deduction
In the passage of H.R. 1, the moving expenses tax deduction remained suspended for most workers, continuing the trend established by the Tax Cuts and Jobs Act of 2017. Despite the relocation and mobility industry lobbying efforts, Congress did not fully reinstate the relocation tax deduction.
The One Big Beautiful Bill Act (OBBB Act), signed into law on July 4, 2025, expanded the relocation tax deduction’s eligibility to a specific group: employees within the U.S. intelligence community. This expansion includes workers in agencies such as the Central Intelligence Agency (CIA), National Security Agency (NSA), and the Defense Intelligence Agency (DIA), as well as other federal employees working in certain offices within the Departments of State, Treasury, and Homeland Security.
Under previous laws, active-duty military personnel were already eligible and continue to be able to claim the moving for work tax deduction.
This new eligibility for government employees relocating for work to make a tax deduction is a small victory for the mobility industry. Still, it leaves many relocating for work without the same tax benefits they might have once enjoyed.
The Case For Reinstating the Moving & Relocation Tax Deduction
Increases the Cost of Relocation for Employees
Without the benefit of a moving expenses tax deduction, employees often face an unexpected financial burden when relocating for work. Many are surprised to learn that relocation benefits are taxed as regular income, reducing the actual support they receive and creating confusion during tax season.
This tax treatment can discourage employees from accepting relocation packages, especially when those packages don’t fully offset the added tax liability. The impact is most severe for individuals moving for opportunity but lacking substantial financial support from their employers. As a result, relocation becomes a privilege primarily available to higher-income earners or those with executive-level backing.
This dynamic creates a clear equity gap. Without financial relief, talented mid-level or entry-level professionals may feel forced to decline opportunities that require them to move.
Increases Relocation Expense for Employers
Eliminating the moving expense tax deduction has significantly raised the cost of relocating employees for employers, especially when employers use relocation gross-ups to keep those employees whole.
Many employers offer a relocation gross-up to incentivize mobility. This additional payment covers the taxes owed on relocation benefits. While it helps retain goodwill with the employee, it inflates the employer’s overall cost of a move.
For example, a $30,000 relocation benefit with a 24% gross-up costs $37,200. More advanced methods, like supplemental or marginal gross-ups, account for taxes on the gross-up itself, raising costs even further:
- 35% supplemental gross-up → $46,153 total
- 40% marginal gross-up → $50,000 total
These increased expenses burden employers, especially those relocating multiple employees or operating under tight talent acquisition budgets.
Barrier to Relocation
Taxes on moving expenses significantly increase the overall cost of relocating, discouraging Americans from pursuing new job opportunities in different locations. When the loss of tax deductions compounds the financial burden of moving, employees may choose to stay put, even if a better opportunity awaits elsewhere.
The American workforce does not feel this impact equally. Individuals without substantial employer-sponsored relocation support are often the most affected. The additional costs can be prohibitive for many middle-income or early-career workers. Without a relocation tax deduction, the playing field becomes more uneven, and only those with higher salaries or executive-level packages can afford to move for work.
Barrier to Global Mobility and Economic Growth
Taxing relocation benefits doesn’t just impact individual employees. Relocation tax deductions have broader consequences for businesses and the economy. When relocation becomes more expensive, employers are less inclined to offer relocation packages or support global mobility initiatives. Limiting relocation makes it harder for companies to fill critical roles, expand into new markets, or recruit top talent outside their immediate geographic area.
Global mobility links to faster business growth and greater adaptability in competitive industries. According to TechNomads, 78% of relocated employees show improved performance, and companies can see up to a 270% return on investment from assignments lasting two years or more.
Without cost-effective relocation options, businesses face greater difficulty deploying their workforce where needed most, particularly in underserved or emerging markets. Therefore, a lack of a tax deduction for those relocating for work stifles organizational growth and hinders broader economic development and talent distribution across regions.
The State of Relocating For Work Tax Deductions in 2025
As of 2025, most employee relocation expenses remain fully taxable at the federal level due to the continuation of provisions introduced in the 2017 Tax Cuts and Jobs Act. These include lump sum relocation bonuses, reimbursements, and managed relocation services. All relocation benefits are taxable unless specific state laws, government, or military exemptions apply.
These tax implications can cause confusion and financial stress for employees who may not expect to pay out-of-pocket for job-related moves. Employers face added pressure to “gross up” benefits without a federal deduction or exclusion or adopt more strategic approaches to minimize the tax burden on transferees.
The removal of the moving expense deduction continues to disrupt talent mobility and raise the cost of workforce relocation.
Manage and Optimize Relocation & Global Mobility Taxation
Navigating the tax implications of employee relocation and global mobility is more complex than ever. But you don’t have to do it alone. At NRI Relocation, we help organizations design smarter, tax-aware relocation policies that protect their talent and bottom line.
From gross-up strategies to tax planning and policy benchmarking, our experts prepare your company and your employees for the financial realities of relocation. Whether you’re managing domestic employee moves or international assignments, we can help you reduce costs, improve employee satisfaction, and stay compliant.
Let’s make your mobility program work smarter.