Can I Deduct Moving Expenses for My Business?

Moving a business can be expensive, and many owners wonder if these costs are tax-deductible. The IRS allows certain moving expenses to be deducted, but only if specific criteria are met. Understanding the rules helps businesses maximize deductions while staying compliant with tax laws.

Tax-deductible moving expenses depend on factors like distance, purpose, and the type of costs incurred. Knowing what qualifies and how to properly claim these deductions is essential to avoid mistakes that could lead to an audit or lost savings.

Eligibility Based on Distance and Purpose

For a business move to qualify for a tax deduction, the relocation must meet IRS requirements related to necessity. Unlike the 50-mile rule for individual moving expenses, business relocations are evaluated based on whether they support continued operations or improve efficiency, profitability, or market reach.

A move that expands access to customers, suppliers, or a skilled workforce typically qualifies. For example, a manufacturing company relocating from a rural area to a city with better infrastructure and supply chain access is likely eligible. A retail business moving to a high-traffic area to increase sales can also justify the deduction. The key is demonstrating that the move benefits the business rather than being for personal convenience.

If a company relocates but shuts down soon after, the deduction may be disallowed. Sole proprietors and small businesses must be especially careful, as personal and business finances often overlap.

Qualifying Relocation Costs

Businesses can deduct moving expenses if they are directly related to relocation and necessary for continued operations. These costs must be ordinary, necessary, and reasonable under IRS guidelines.

Transportation

The cost of moving business assets—such as equipment, inventory, and office furniture—is deductible. This includes hiring a moving company, renting trucks, and fuel costs. If employees must relocate work-related materials like computers or specialized tools, those expenses may also qualify.

Mileage for company-owned vehicles used in the move can be deducted based on actual expenses or the IRS standard mileage rate, which is 67 cents per mile for 2024. Businesses using the actual expense method must track fuel, maintenance, and depreciation costs. Airfare and train tickets for transporting business assets or employees involved in the move may also qualify.

Storage

Temporary storage costs for business property during a move can be deducted if they are essential to the transition. This includes rental fees for storage units or warehouses used to hold equipment, inventory, or office supplies while the new location is being prepared. The IRS generally allows deductions for storage expenses incurred within a reasonable timeframe, typically up to 30 days, though longer periods may be justified if delays occur.

For example, if a business moves to a new city but faces construction delays at the new office, the cost of storing office furniture and equipment during the waiting period is deductible. However, long-term storage unrelated to the move—such as keeping excess inventory in a warehouse for future use—is not. Businesses should keep records of storage rental agreements and payment receipts.

Professional Services

Certain fees paid to accountants, attorneys, and consultants during a move may be deductible. If a company hires a tax professional to ensure compliance with state and local tax laws in the new location, those fees qualify. Legal fees for reviewing lease agreements or negotiating relocation-related contracts may also be deducted.

Real estate commissions and broker fees for securing a new business location are generally deductible if directly related to the move. However, costs associated with purchasing property—such as title insurance, loan origination fees, and appraisal costs—are considered capital expenses and must be depreciated over time. Businesses should carefully categorize professional service expenses to ensure they are claimed correctly.

Deducting Owner vs. Employee Moves

Business owners and employees are treated differently when deducting moving expenses. Owners relocating their business can deduct expenses directly related to the move, provided they are necessary for operations. These deductions are claimed on the business’s tax return, whether on Schedule C for sole proprietors, Form 1120 for corporations, or other relevant filings for partnerships and LLCs.

For employees, the rules are stricter. The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the deduction for unreimbursed employee moving expenses for most workers through 2025. Employees cannot deduct moving costs on their personal tax returns, even if they relocate for their job.

If an employer reimburses an employee for moving costs, tax treatment depends on how the payment is structured. Under an accountable plan—where employees provide receipts and are reimbursed only for actual costs—the reimbursement is not taxable. However, if the reimbursement is made under a non-accountable plan or given as a lump sum, it is considered taxable wages and must be reported on the employee’s W-2 form.

Employers covering employee relocations must also consider payroll tax implications. If reimbursements are treated as taxable wages, they are subject to federal income tax withholding, Social Security, and Medicare taxes. However, if the business directly pays for moving expenses—such as hiring a moving company or covering temporary housing—those payments may be deductible as a business expense while remaining non-taxable to the employee.

Filing Requirements

Deducting business moving expenses requires careful documentation and adherence to IRS regulations. Businesses must report these expenses on the appropriate tax forms based on their entity type. Sole proprietors typically claim deductions on Schedule C (Form 1040), while partnerships report them on Form 1065, allocating the deduction to partners via Schedule K-1. Corporations must include eligible moving costs on Form 1120, categorizing them as ordinary business expenses.

Proper classification of expenses is essential. Moving costs should be recorded separately from capital expenditures, as only direct relocation expenses can be deducted in the year they occur. If a business purchases property or makes significant improvements at the new location, those costs must be capitalized and depreciated over time. The IRS may scrutinize filings where large moving deductions coincide with significant asset purchases, making it important to maintain clear distinctions between deductible expenses and capital investments.

Non-Deductible Expenses

Certain moving costs are explicitly excluded from deductions under IRS rules. Personal moving expenses, even if incurred by a business owner, do not qualify unless directly tied to business operations. If an owner relocates their residence alongside the business, expenses related to household goods, family travel, or new home purchases are not deductible.

Lease termination fees for a previous office or facility are generally not considered a moving expense but may be deductible as a separate business expense if the lease agreement includes an early termination clause. Similarly, costs associated with finding a new location, such as real estate search fees or exploratory travel, are not deductible as moving expenses but may qualify under general business deductions. Any improvements or renovations made to the new location must also be capitalized rather than deducted in the year of the move.

Recordkeeping

Maintaining thorough documentation is necessary to support moving expense deductions in case of an IRS audit. Businesses should keep detailed records of all moving-related transactions, including invoices, receipts, contracts, and payment confirmations.

Bank statements and credit card records should align with reported expenses, and businesses should categorize costs appropriately in their accounting software. If a company reimburses employees for moving expenses, maintaining copies of reimbursement requests and supporting documentation is necessary to confirm compliance with tax regulations. Retaining these records for at least three years after filing ensures businesses can provide evidence if questioned by tax authorities.