What You Should Know About Moving Expenses Deduction

Posted in Moving Essentials,Planning the Move on July 5, 2021

By Kate Holland

If you’re planning on moving across the country, it’s natural to look for ways to cut down on costs. That’s why you’re probably wondering, “are moving expenses tax-deductible?” Since the latest overhaul in 2017, most taxpayers are not eligible for moving expenses deduction, but some alternatives are still available.

Relocations are costly, and all the payments connected to them were deductible with the IRS if your move was work-related until the 2017 Tax Cuts and Jobs Act (TCJA). Unfortunately, TCJA eliminated moving expenses tax deduction from the code for most taxpayers starting on January 1, 2018. However, it’s still available to military personnel on active duty and taxpayers in some states.

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Moving Expenses Deduction for Members of the Military

If you are a member of the US Armed Forces, you are probably wondering, “can I deduct moving expenses on my taxes” and how do you qualify. You must meet two requirements – to be on active duty, and relocating due to a permanent change of station. The IRS offers a definition of permanent change of station as a move from one permanent post of duty to another, or a move from the last post of duty to home or nearer in the US, and it must occur within one year of ending active duty.

Should the Military Filers Use the IRS Form 3903 for Their Tax Deductions?

Members of the military should fill out Form 3903 and deduct it as an adjustment to income. This Form is not required if you moved to a location outside the US in an earlier year, and you claim only storage cost for the period you were away from the country. If you’re wondering, “Can I claim moving expenses on my taxes” and you are a spouse or dependent of a deceased, imprisoned, or deserted military member, it also qualifies you for taxes return for relocating.

A US soldier in front of a flag
If you are an active member of the US Armed Forces that relocated due to a change of station, you are eligible for a tax return

What Can You Write off for Moving Expenses?

When you are relocating to a location within the US (for the members of the military and other taxpayers in some states,) the expense of relocating household goods and personal property is included in the deductions. Knowing what else is included will help you move efficiently and without any stress, knowing that you will be able to save up on costs:

  • Gas or the mileage on your car, as well as tolls and parking.
  • Lodging during the long-distance moving and driving a personal vehicle is also included, without meals and food.
  • Rental trucks if you have rented for a DIY move.
  • Short-term storage service, and that means storing your goods up to 30 days before they are delivered to your home. If you are using this solution while you move, make sure you’ve properly protected items in storage units.
  • Packing service, if you’ve decided to invest in this solution.
  • Relocating insurance for your belongings during the transportation.

Other things can be included, such as disconnecting utilities, and you can also deduct the cost of auto transport service for your vehicle.

A man driving
Driving your personal vehicle is included in taxes return

Which States Allow Moving Expense Deduction?

The majority of states follow the government’s resolutions and automatically update their income tax rules. But seven states still allow tax deduction on moving expenses, and these are California, New York, Pennsylvania, Massachusetts, New Jersey, Hawaii, and Arkansas. Some rules regarding deductions vary from state to state, so you should check with your tax advisor to understand these rules.

Can I Deduct Moving Expenses if My Employer Reimburses Me?

If you live in a state that allows you to deduct on your cross-country moving expense, and your employer wants to reimburse your relocation, rules may vary. States like New York and California exclude qualified employer reimbursements relocation costs from income on your state return. Still, some employers want to cover the cost of relocation for an employer they deem valuable and, by doing so, enable a stress-free relocation.

What Qualifies You for a Tax Return?

While you’re sorting and organizing important documents at home, consider whether you are eligible for deductions on your relocating costs. Take into consideration the time and distance criteria if you’ve managed to get a business position in another state before you’ve moved. The distance between your previous address and new business position must be at least 50 miles farther than your previous business was. The IRS requires you to use the shortest commutable routes between your home and work to properly evaluate if you satisfy the distance criteria.

While the IRS does not specify the exact number of days or hours a week it takes you to be a full-time employee, you must work full-time for a minimum of 39 weeks during the one-year period, which starts on the day you arrive at your new address. Don’t make a relocating mistake by thinking you can not apply if you work at several business locations – you are eligible for this requirement even if the 39 weeks are not consecutive, and you work for multiple employers.

Writing on a paper
Fill out the form with the IRS

Are Moving Expenses Itemized Deductions?

You’ve hired reliable cross country movers and taken that off of your to-do list, but now that you’ve settled, you’re considering how to deduct on costs. Relocating to a new state cost is an adjustment to income and not an itemized deduction, so you don’t have to itemize it in order to claim it. These costs reduce your adjusted gross income and may also help you qualify for other benefits. They are limited at higher income levels. In the following video, you can hear some insight on what happened to deductions.

Perhaps Moving Cross Country Expense Is Not Tax Deductible For Most Taxpayers, but You’re Free to Find Other Means to Save on Costs

If you don’t qualify for deductions on your taxes, you might start feeling some anxiety about your move-out, as well as the fact that hiring long-distance movers and their cross-country moving services will all cost significantly in the end. But, there are other ways you can organize your move and save a bit of money. This includes thoroughly decluttering to transport fewer items and making a garage sale to earn a bit more money for the move, but also getting free boxes and other packing materials from a local retail shop.

Kate Holland