Are Moving Expenses Tax Deductible? - The Full Guide
If you have to move for work, you might wonder if you can deduct those expenses, when you moved, from your taxes. The laws have changed a bit in the past five years. Previously, the federal government let you deduct moving expenses if you moved a certain distance for your employer's benefit.
However, the Tax Cuts and Jobs Act changed that. Now, only certain employees can deduct moving expenses according to federal law, and only some states allow a moving expense deduction from state taxes. We'll explain the differences in this article.
What Was The Law Before 2017?
Before 2017, you could claim a moving expense tax deduction on your federal tax return if you were moving for job-related reasons. The requirements to classify the move as job-related included:
The move had to coincide with the start of work. Within 12 months after moving, the employee had to work full-time for at least 39 weeks at the new job.
The commute from the old home to the new job location had to increase by at least 50 miles.
If you met the requirements, you could take a federal tax deduction from your taxable income for your moving expenses. However, the expenses had to be necessary for the move to take the moving expenses deduction. Tax-deductible moving expenses included:
Professional packing and moving costs.
Moving truck rental
Insuring belongings during a move.
Connecting and disconnecting utilities.
Moving your vehicle
Storing belongings after the move.
Transportation expenses such as gas, oil, and parking fees.
Those who were moving couldn't deduct the following
Buying or renting a home
Meals on the road
House-hunting or pre-move visit costs
Any expenses an employer already reimburses.
Can You Deduct Moving Expenses Now?
Maybe. As of 2017, the Tax Cuts and Jobs Act ended most taxpayers' federal moving expense deduction, at least until 2026. Only those who moved before January 1, 2018, and active-duty military members qualify now.
If you fall into either of those categories, you've hopefully taken those benefits if you qualify. If you haven't, check your prior returns. According to the IRS, you can amend your tax return up to three years after filing it or two years after paying the tax.
Also read: How Much Is Social Security tax?
What if You Still Qualify for a Moving Tax Deduction?
If you still qualify for the moving expense deduction, here's what you should know:
You Can Deduct Only Costs Associated With The Move.
These include packing, shipping, travel, temporary lodging, storage, a rental truck, supplies, and parking, but not meal or home shopping costs.
If Your Company Reimbursed You For The Expenses, They're Not Deductible.
Active duty military personnel who had to move because of a duty station change, or a retirement move, are exempt from the work distance and length requirements. You can't claim government-reimbursed expenses.
Residents Of Certain States May Still Get A Tax Break.
States have different income tax rules depending on how they update their rules. Some states update their rules following federal changes, while others update them with legislation. Only seven states still allow moving tax deductions or exempt moving reimbursements from income as of July 2019:
Arkansas law allows you to deduct the "reasonable expenses of moving your possessions and travelling from your old residence to your new one." These can include costs for lodging, but not meals while on the way there. You can't deduct sightseeing trips, even if you make them on the way to your new house.
According to California law, if you moved in connection with your employment or changed jobs, your moving costs may be deductible. A minimum of 50 miles must separate your new employer and your old home. You must live at least 50 miles away from your previous home if you do not have a former workplace.
Hawaii law lets you deduct the reasonable expenses of moving your personal belongings and household goods. These expenses include lodging costs, but not meals while travelling to the new residence. As with the other states, your new principal workplace must be 50 miles away from your previous home at a minimum.
You also must work full-time in your new area for a minimum of 39 weeks in the 12 months after you move. You must work a minimum of 78 weeks in the 24 months following your move if you are self-employed.
Massachusetts law is similar to the others. Your new primary work location must be at least 50 miles further from your previous address than your last main job location to write off moving expenses on your Massachusetts taxes.
You must be a full-time employee for 39 weeks in the first 12 months following the move. If you're self-employed, you have to be employed or performing services for 78 weeks or more in the 24 months after the move and a minimum of 39 weeks during the first year following the move.
You need to spend a reasonable amount of money on the move. Costs are limited to the cost to transport household goods and personal items, and travel to the new residence. This includes lodging, but not meals.
When you use a car to move your belongings, you can deduct either:
The actual out of pocket costs incurred, like gas and oil, but not repairs or depreciation or
A standard mileage amount as determined by the IRS.
New Jersey's law is similar to the others. You can deduct expenses in moving if the move relates directly to your new location. If you start your new job within one year, you can deduct moving expenses. You don't have to start it before moving, as long as you are currently working at the location.
You have to move at least fifty miles away from your previous location. The distance between the two areas should be the shortest route that you can take to get there. You also need to be employed full-time and have worked 39 weeks or more in the year of your move before you claim a deduction on moving expenses.
Within 24 months after moving, self-employed individuals must have worked 78 weeks. Deductible moving costs include gas, vehicle rental expenses, packing and crating expenses, utility connection and disconnection expenses, lodging expenses incurred while moving, storage costs for up to 30 days, and travelling by personal car.
The move must be related to starting employment to be deductible in New York. You can generally deduct expenses in moving you incur a year removed from starting your new job. It also needs to be a minimum of 50 miles farther away from your previous residence than your old place of employment.
Exceptions to the time rule apply in the circumstances such as death, disability, and separation. Even if the filing deadline for your tax return falls before your moving expenses are allowable, you may still deduct them if you think you'll pass the time test.
"Reasonable expenses" include the travel expenses from the previous residence to the new home. This should be the most direct and shortest route possible with conventional transportation.
Finally, employees have to be employed full-time for 39 weeks within a year after moving to the region where they will be working. Those who are self-employed must work full-time for 39 weeks in the first year and 78 weeks in the first two years.
Pennsylvania law allows you to deduct moving expenses for yourself, your family, household goods, and personal effects only if you move for your employer's benefit and if your new work location is at least 35 miles farther from your old residence than your old one was.
So if an employer asks you to move to a new location that's at least 35 miles farther than where you're living now, you can write off moving expenses. If you decide to make the move yourself, you can't.
Allowable expenses consist of transportation to the new residence. You can use the out-of-pocket cost or the federal mileage allowance, expenses for storing household goods, meals, and lodging on the way, parking fees, and tolls.
You can't deduct expenses to sell or purchase a home or break a lease, pre-moving house-hunting fees, temporary lodging before moving or the day after arriving at the new workplace location, and any costs or expenses not directly related to the actual move.
Also read: What Is FUTA Tax - All You Need To Know
Ways Your Employer Can Help
The federal tax overhaul creates problems for many taxpayers who need to move. Relocation reimbursements or bonuses from your employer are taxable. Your employer also no longer has the right to deduct your relocation costs from their tax return.
Despite that, some businesses have realized they need to do everything possible to keep valuable employees. They may compensate their workers by grossing up - they track and reimburse the employee's moving costs while also paying the additional taxes incurred by their reimbursements.
Larger companies often hire relocation management companies to handle the paperwork. If your company asks you to move, it's worth asking them if they consider it.
Also read: Are GoFundMe Donations Tax Deductible?
Other Ways You Can Save
If you're ineligible for tax savings and your employer won't reimburse your moving costs, you can still take many money-saving measures. Start by cutting your moving costs. These could include:
Do More Yourself.
Pack, load, and unload your stuff if you can. Use the pros only for tasks you can't handle by yourself.
Move At The Right Time Of The Week Or Month.
Professional moving services may cost less in the middle of the month or on a weekday, in the fall or winter, or earlier in the morning.
Moving costs can vary greatly. Check out their reviews, BBB ratings, and insurance information.
Look For Free Boxes.
You can often get them at the grocery, liquor store, retail store, and library.
Move Less Stuff.
Sell or donate items you no longer need. Many people move things they never use, then pay for unnecessary storage in their new place.
Use A Credit Card With Points Or Rebates For The Rest Of Your Moving Expenses.
Some credit cards may give points on moving-related purchases such as moving supplies, gas, and airfare. The cards you use can help you cut costs even if you can't deduct moving expenses.
That's what you need to know about the moving expense tax deduction. If you're an active-duty military member or live in a state where moving expenses are tax-deductible on your state tax return, keep track of your costs to take advantage of the full deduction. Otherwise, do what you can to save money on your move.
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