[Edited 01/24/2018 7:40 PT]
To exclude this payment from taxable income, you will have to complete Form 3903 and report the 'moving expenses' (travel costs) your husband paid during his IMA assignment, up to the amount of the reimbursement reported in Box 12. By limiting his reported costs to the amount of the reimbursement, you won't generate an additional moving expense deduction.
In the Moving Expenses interview:
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Check that "My move to the new locations was work-related";
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Select that he was an "Employee";
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Answer Yes to "Did you work or do you expect to work full-time for at least 39-weeks during the first 12 months after the move" (An IMA assignment is still a 'full-time, year-round' assignment even when not on duty);
- Enter mileage as Old Home = Civilian residence, Old Workplace = Civilian workplace), New Workplace = IMA Duty Location;
- For Moving Expenses, enter the amount reimbursed as "Travel and Lodging for You"
(The Air Force Reserve is reimbursing your husband's 'moving expenses' to, at and from (?) his Individual Mobilization Augmentee (IMA) assignment. They are reporting the reimbursement in Box 12 of Form W-2 using Code P ("Excludable moving expense reimbursements paid directly to employee"). An amount with code P will transfer to Line 4 of Form 3903 for moving expenses. Form 3903 can be completed for the amount of moving expenses paid by the taxpayer. If a moving expense deduction is computed, it will be reported on Line 26 of Form 1040.)
