Besides being stressful and requiring a lot of planning, moving to a new place also takes money. Costs for moving companies, advance deposits for your new residence, and maybe new furniture or remodeling you have in mind for your new place – all of it can strain your bank account. Whatever the reasons for your move, there is one more factor we must consider as well: taxes. We all know taxes are complex and change constantly, so it’s crucial to keep up with the latest information.
Relocating to a new place for a new job can be costly. Many employers will cover all or part of employees’ moving expenses, but not in every case. For information on how to make your move easier, this blog offers suggestions for packing, moving with infants or children, and moving on a budget.
Here’s what you need to know about moving and taxes.
Moving Expenses Are Not Tax Deductible For Most People
Starting in 2018, Congress did away with the federal tax deduction for moving expenses, with few exceptions. The Tax Cuts and Jobs Act of 2017 eliminated the deduction just until January 1, 2026. But there’s serious talk about making the elimination permanent.
If you moved in 2017, for a new job or to seek work, your moving expenses may be deductible for that year. If you didn’t claim the deduction, it might be worth amending your federal return. You usually have up to three years from the time you filed a return to amend it, or two years after you last paid taxes on that return, whichever is later. You use IRS Form 1040-X to file an amended return.
One exception to the new law is if you are active-duty military and moved pursuant to a permanent change of station. Another exception is if you are a self-employed business owner and moved as part of the process of starting a new business.
A spouse or dependent child of a military member who is imprisoned, deceased, or deserted may also qualify to deduct moving expenses. Other exceptions are surviving family members of a person who worked abroad for the United states, people relocating back to United States after retiring from their work abroad, and people who lost their job due to a disability.
If you moved in 2018 or later, this page can help you determine whether your expenses are deductible. But unless you’re active-duty military and moved for a permanent change of station, the answer is probably not.
If you moved in 2017 or you qualify for one of the exceptions and need information about deducting your moving expenses, read on.
What Moving Expenses Are Deductible?
Suppose you do qualify for the moving expense deduction. Maybe you moved in 2017 to start a new job or to find work, or you’re active-duty military. Here are some things you need to know:
Only Direct Moving Costs are Deductible
For moves within the U.S., deductible expenses are those directly related to the move. This includes:
- travel costs for yourself and family members traveling with you
- packing and moving household goods
- turning off utilities at your old location
- shipping a vehicle
- temporary lodging while traveling to your new location
- parking costs
- storage costs for your property for up to 30 days until it is delivered to your new home
Things that aren’t deductible include:
- meals you ate on the way to your new location
- costs related to any side trips you took while traveling to your new location
- trips before your move to look for a new home
- purchasing or remodeling your new home, signing a new rental lease
- temporary lodging at your new location while waiting to move into your new home
- costs of returning to your old location after you move
Requirements for Deducting Moving Expenses
To qualify for the deduction, you must meet three additional tests:
Distance Test: Your new work location must be at least 50 miles farther from your previous home than your old work location. For example, suppose you commuted 10 miles from your old home to your old workplace. If your new workplace is 100 miles from your old home, then you meet the distance test, because 100 miles minus 10 miles is 90 miles, which meets the 50-mile minimum.
Time Test: Within 12 months either before or after the time you start working at your new workplace, you must relocate to your new home.
Length-of-Work Test: You must work full time for an employer for at least a total of 39 weeks in the year following your move. But the weeks don’t need to be consecutive and it doesn’t have to be the same employer the entire time. If you are self-employed, you need to work full-time in self-employment for at least 39 weeks during the first year after your move and for at least 78 weeks during the two years after your relocation.
If you’re active-duty military and move to a new duty station or to a retirement location, you’re don’t need to meet the length-of-work and distance tests.
How to Record the Deduction
To claim moving expense deductions, you record your expenses on IRS Form 3903 and enter the result on line 26 of the 2017 Form 1040. This deduction is available even if you also claim the standard deduction or itemize your deductions.
Military members claiming moving expense deductions also use Form 3903. For tax year 2018 and beyond, you enter the deduction on the Form 1040 Schedule 1. For 2020 the Schedule 1 is here.
Moving as a Business Owner
If you own a business and you and your business both move, then your business moving costs are deductible as business expenses. This includes costs of moving business equipment and inventory from an old location to a new one. It also includes costs for renting or buying a new business office.
If you’re self-employed and you’re moving as part of the process of starting a new business, your personal moving expenses that were related to the business move may also be deductible. To be considered self-employed, you can’t own a corporation, or work or attend school part-time. You must also meet the distance and length-of-work tests.
State Tax Moving Deductions
If you’re in one of the states that have income tax, your moving expenses may be deductible on your state taxes. Check with the laws of your state, as some states conform to federal law in this regard and others don’t. New York, Massachusetts, and California are among those that did not automatically follow federal law.
NOTE: The information contained in this post is not a substitute for tax or legal advice. State and federal laws change frequently, and the information in this post may not apply to your situation or reflect your state’s current laws or current federal law. Please consult with a qualified professional for current tax or legal advice.
Finding Help with Moving Professionals
We hope you found this blog post Are Moving Expenses Tax Deductible? useful. Be sure to check out our post How to Financially Prepare for a Long-Distance Move for more great tips!
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