Are Moving Expenses Tax Deductible?
Written by
Elizabeth Constantineau, AI Editor
Edited by
Elizabeth Constantineau
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Moving can be expensive, and you might wonder if you can get some relief by deducting those costs from your taxes. Tax rules keep changing, so it’s key to know what’s new, especially about moving expenses. Keep reading to explore the current state of tax deductions for moving costs and discover if you qualify.
Are Moving Expenses Tax Deductible?
As of the tax changes that took effect in 2018, moving expenses are no longer deductible for most taxpayers. This shift in federal tax law removed the possibility for many to claim deductions for moving costs related to new employment or job relocation. However, an exception remains for active duty members of the Armed Forces who move due to military orders for a permanent change of station, ensuring they can still benefit from this deduction.
State-Level Deductions
Despite the federal adjustments, some states have chosen to maintain the deduction under their tax codes. For example, California continues to allow eligible residents to deduct moving expenses on their state tax returns, providing a state-level benefit even as the federal deduction has vanished. Taxpayers in states offering this deduction should consult their state tax regulations or a tax professional to understand the specific qualifications and requirements.
Qualifying for Deductions
For members of the Armed Forces and taxpayers in states still offering this deduction, certain criteria must be met. The IRS outlines two primary tests: the distance and time tests.
- Distance test: The new workplace must be at least 50 miles farther from the taxpayer’s former residence than the old job location was.
- Time test: Taxpayers must work full-time for at least 39 weeks within the first 12 months after relocating. The weeks do not need to be consecutive or with the same employer but must meet the industry’s standard for full-time employment.
Deductible Moving Expenses
For those eligible, deductible moving expenses include:
- Costs of moving household goods and personal effects.
- Travel expenses to the new home, excluding meals. This can include gas, oil, parking fees, tolls and even airfare or train tickets. Alternatively, taxpayers can use the IRS standard mileage rate for moving.
Claiming the Deduction
Eligible taxpayers, particularly qualifying Armed Forces members, should use IRS Form 3903 to calculate and claim the moving expense deduction. This form is attached to the taxpayer’s annual return for the year of the move. It’s crucial to maintain records and receipts as evidence of the expenses should the IRS require verification.
Final Take
While the opportunity to deduct moving expenses on federal tax returns has narrowed, understanding the specific circumstances under which these deductions are still available is vital. For qualifying Armed Forces members and residents of certain states, these deductions can offer meaningful financial relief during a move. Always consider consulting a tax professional to navigate these rules effectively and ensure compliance with the latest tax laws.
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FAQ
Here are the answers to some of the most frequently asked questions about moving expenses.- What kind of moving expenses are tax deductible?
- For qualifying individuals, particularly members of the Armed Forces on active duty moving due to a military order, tax-deductible moving expenses include the costs of moving household goods and personal effects, as well as travel expenses to the new home. This can cover packing, hauling, in-transit storage, insurance and transportation costs, such as gas, oil, parking fees, tolls and airfare or train tickets.
- Why are moving expenses no longer deductible?
- Beginning in 2018, the Tax Cuts and Jobs Act suspended the moving expense deduction for most taxpayers as part of broader changes to tax law. The suspension aimed to simplify the tax code and offset the cost of other tax cuts within the legislation. The exception to this suspension applies to members of the Armed Forces on active duty who move due to a military order.
- Which states still allow moving expense deductions?
- Some states have chosen to retain the moving expense deduction on their state tax returns despite federal changes. California is one notable example that continues to allow eligible residents to deduct moving expenses. Taxpayers should check with their state's tax agency or a tax professional for the most current information, as state-level tax policies can vary and change.
John Csiszar contributed to the reporting for this article.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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- TurboTax. 2024. "IRS Moving Expense Deductions."
