It’s very common for today’s generation of workers to relocate for work-related purposes. On the one hand, traveling and relocating can open the doors for career progression and great professional experiences. Still, on the other hand, it can also be a costly undertaking.
Luckily, the IRS allows work-related moving expenses to be tax-deductible, but with certain restrictions and conditions. In the context of federal taxes, moving expenses are the costs incurred when you relocate for a job transfer. But the Tax Cuts and Jobs Act of 2017 removed moving expense tax deductions for most taxpayers from 2018 through 2025. The only exceptions are members of the US Armed Forces or members of the intelligence community who are relocating due to a permanent change of station.
Nevertheless, you may be able to deduct some moving expenses on your state income taxes depending on where you live, even if you don’t fall under the military or intelligence community. Taxpayers can claim a reasonable amount of money that was paid for moving themselves, family members, and household items. These moving expenses are to be deducted from employment income earned at the new location. This general rule allows for specific exclusions, limitations, and inclusions.
Who Can Deduct Moving Expenses?
Firstly, the move has to be closely related to the place and time of your new job. So you should start working close to where you moved and within a specific time frame. The rules are pretty flexible, and the IRS states that moving expenses can be claimed if you start working within one year of moving. Therefore, you can move to a new location, even if you don’t have a job lined up for you yet.
Secondly, your new work location should be at least 50 miles from your old house, farther than your previous job location was from your last home. Essentially, you must take the distance from your old house to your new job and add 50 miles to it – and that’s how far away your new office must be. For example, if your old job was 30 miles from your house, then you need to move at least 80 miles away to meet the requirement.
Thirdly, you should have had 39 weeks of full-time employment in the year after your move. If you move in the latter months of the year or start working a few months after moving, you can satisfy this requirement if you expect to work 39 weeks of the coming year. If you’re self-employed, then there is a different time test. You should work full-time for a minimum of 39 weeks during the first year and for a total of 78 weeks during the first 2 years after you arrive at the new job location.
Members of the Armed Forces are exempt from meeting the time or distance tests because the US Government requires their relocation.
What Are The Tax-Deductible Expenses?
- Shipping and packing costs include materials, boxes, moving and storage expenses during transit, and the cost of shipping household pets.
- Travel expenses, including airline tickets, hotels and lodging, road tolls, and field costs. Food does not fall under this category.
- Utilities, including connection and disconnection fees.
Non-allowable deductions are any expenses related to selling or buying your home, expenses incurred from setting up your new house, or charges for breaking the lease.
Special rules will come into play if your employer reimburses you for your moving expenses. If the reimbursement was not included in your Form W-2 wages, then you cannot deduct any of those expenses because you have already availed yourself of that tax benefit. But any other deductible moving expenses that your employer covers the cost for, which are included in your taxable wages, can be claimed as a deduction.
Make sure that you keep a detailed record of your moving expenses. This includes travel expenses, packing materials, and other costs associated with moving. Having proper documentation makes it easier to submit to the IRS if they request proof.
Bottom Line
While moving out and starting afresh is a great adventure, it can also be expensive. This is why it is so important to explore any ways to save extra money. The IRS allowed a moving tax deduction for people who relocated for work and for those who served in the military. Still, after the 2017 Tax Cuts and Jobs Act, the rules changed, and it is no longer deductible for most people, except for those serving in the military.
It’s still important to keep track of your moving expenses because some states allow deductible moving expenses on your state tax returns, provided that you meet certain conditions. Always keep your moving cost receipts with you. Digitize your receipts by taking photos or scans, ensuring you have a backup copy if the originals get lost.
If you need help with your taxes, you can always get expert opinions, especially if your move has many variables and your issue is complex. Furthermore, not every moving cost is a tax-deductible expense, so if you have questions about your expenses or if you’re unsure about how to interpret your state’s forms, it’s advisable to seek expert help to navigate them easily.
