Relocation Expenses -- Time and Distance Tests

BACKGROUND

In accordance with the University's policy on Relocation Expenses, organizational units may pay for relocation expenses for new or current employees, in certain cases.

All such payments or reimbursements are taxable to the employee, unless the relocation meets both of the "time and distance tests" under federal tax law.  If the relocation does qualify under the time and distance tests, then payments are taxable or nontaxable depending upon the type of expense, as outlined in our Relocation Expenses policy.  If the relocation does not meet the time and distance tests, then all payments are taxable regardless of purpose.

This page gives a general summary of the time and distance tests.  You can also find more detail about these tests in IRS Publication 521, Moving Expenses.

TIME TEST

The employee must work full-time within the local area for at least 39 weeks during the first 12 months after arriving at the new job location.  Those 39 weeks need not be consecutive.  The employee is considered to have worked full-time during any week for which they are temporarily absent due to illness, vacation, layoffs or weather-related closures.

For seasonal workers such as some faculty, the employee is considered to be working full-time during their off-season if their normal work schedule includes an off-season of less than 6 months.  For example, a faculty member on a 12-month contract who teaches on a full-time basis for more than 6 months is considered to have worked full-time for the entire 12 months.

Organizational units may submit their payment requests based on their reasonable expectations of the employee fulfilling the 39-week time test.  Organizational units do not need to wait until 39 weeks have expired before submitting their payment requests -- they may do so as soon as they have the proper documentation.

DISTANCE TEST

The employee's new job location must be at least 50 miles farther from his/her former home than his/her old job location was from his/her former home.  For example, if Jane's old job location was 3 miles from her former home, then her new job location must be at least 53 miles from her former home, in order to qualify under the distance test.  The location of the employee's new home is irrelevant for this test.

If this is the employee's first full-time job, or if the employee is now returning to full-time work after a substantial period of part-time work or unemployment, then he will qualify under the distance test if his new work location is at least 50 miles from his former home.

This diagram may also help to illustrate the distance test.