Moving is expensive, but you may be eligible for moving expense tax deductions. This means there are a few expenses that you can deduct, which are associated with moving your personal effects and household goods. Examples include insurance, packing costs, in-transit storage, crating, and trailer hauling. We’ll discuss what moving expenses are deductible, how to apply for them, and who is eligible to apply. We will also discuss the changes in moving expense tax deductions since 2018 and provide an example to illustrate how these deductions work.

Who Is Eligible for Moving Expense Tax Deductions?

In the past, many individuals could claim tax deductions on moving expenses. However, from 2018 onwards, only a specific group remains eligible — military personnel. This change has left many wondering if they still qualify or if there might be any future adjustments to eligibility criteria.

Changes in Moving Expense Tax Deductions Since 2018

The Tax Cuts and Jobs Act (TCJA) implemented in 2018 resulted in significant changes in moving expense tax deductions. They have impacted the kind of expenses that can be claimed and who is eligible for these deductions.

One of the most notable changes brought about by TCJA was the elimination of moving expense deductions for non-military personnel. You do not qualify for moving expense tax deductions if you’re not serving as active-duty military or part of their household.

Some states may still offer state-specific benefits or incentives related to relocation costs, although since 2018, civilian taxpayers can no longer deduct their moving expenses from their federal income taxes. Consult a tax professional or research your state’s regulations regarding the potential benefits available.

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Another change from TCJA was eliminating “qualified” move requirements for military personnel claiming these deductions. Previously, military members needed an order requiring them to relocate over a certain distance and time frame to qualify for these benefits. However, after 2018, this requirement was removed entirely for active-duty military personnel.

These changes emphasize a shift towards limiting taxpayer-funded benefits associated with personal moves and focusing more on supporting those who serve our country through active-duty service obligations.

It’s essential to stay informed about changes in legislation that may affect your eligibility status as it pertains to claiming moving expense tax deductions. To claim deductions, keep good documentation of all qualifying expenses.

What Moving Expenses Are Tax Deductible?

For those who are currently eligible for moving expense tax deduction benefits — active-duty military personnel — there are specific categories of expenses that qualify:

1. Transportation

The costs of transporting household goods and personal belongings from your old residence to your new location may be deductible.

2. Lodging

The costs also qualify if you need temporary lodging during your move due to travel delays or other reasons beyond your control.

3. Storage

In some cases, storage is necessary between moves due to deployment or other official orders affecting housing arrangements.

4. Travel Expenses

Costs incurred while traveling from the old residence to the new location can be eligible for deduction, including gas, tolls and parking fees.

What Moving Expenses Are Not Tax Deductible?

While several expenses may qualify for tax deductions during a move, it’s important to note which costs are not eligible:

1. Meals

Unfortunately, the cost of meals during your move is generally not deductible.

2. House-hunting Trips

Expenses incurred while searching for a new home or apartment in your new location are also typically not deductible.

3. Real Estate Transactions

Costs related to buying or selling a house do not fall under moving expense tax deductions.

It’s essential to keep track of which expenses can and cannot be claimed as deductions to avoid any potential discrepancies with the IRS.

Enlisted military in full dress uniform saluting
Enlisted military in full dress uniform saluting

Moving Expense Deductions for Active-Duty Military

Active-duty military personnel have unique circumstances regarding moving due to their service requirements. Despite the changes in moving expense tax deductions since 2018, active-duty military members remain eligible for certain benefits related to their relocations.

One of the key advantages for active-duty military personnel is that they can still claim tax deductions on qualified moving expenses. This includes transportation costs associated with relocating household goods and personal belongings from their old residence to their new duty station. Also, temporary lodging expenses incurred during the move may qualify for the deduction.

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To take advantage of these moving expense deductions, active-duty military members must ensure they meet specific criteria set by the IRS. They must have received permanent change-of-station (PCS) orders requiring them to relocate and incur qualifying expenses. Military members and their families must keep accurate records of all relevant receipts and documentation supporting their claims.

How to Apply for Moving Expense Tax Deductions

You will need IRS Form 3903 – Moving Expenses to claim your moving expense tax deductions. This form allows you to report qualified expenses associated with your relocation accurately.

When completing this form, ensure all information is accurate and up-to-date before submission. Keep copies of relevant documents, such as receipts and records supporting your claims, should the IRS request verification later.

What You Need to Know About IRS Form 3903

IRS Form 3903 is essential in successfully claiming your moving expense tax deductions. Here are some key points about this form:

Detailed Information

The form requires detailed information about old and new residences and their distance.

Expense Breakdown

Could you provide a breakdown of your qualified moving expenses in various categories, such as transportation, lodging and storage?

Supporting Documentation

Keeping all receipts and relevant records related to your moving expenses is crucial. These documents will serve as evidence should the IRS request verification.

Moving Expense Tax Deduction Qualifications

If you moved before 2018 but didn’t claim the moving expense tax deduction, you can file an amended claim to deduct your moving expenses. Also, if you’re an active-duty military member, you can attach your moving expense deduction claim in Form 3903 to Form 1040.

For active-duty military members, a military order and permanent change of station must cause your move. You can deduct your unreimbursed moving expenses, those of your dependents and your spouse. If expenses are reimbursed or paid for by the government directly, you can’t deduct them.

To qualify for counting the expenses as tax deductions, you must meet the distance and time tests:

Distance Test

To claim moving costs, your new employment location must be a minimum of 50 miles farther away from your former home than your old workplace. For instance, if your home was 40 miles away from your former job, your new company should be at least 90 miles away from the home.

Time Test

The timing of starting your new employment and the time you move must be closely related to qualify for the tax deduction. Meeting this standard requires you to work full-time at your new job for at least 39 weeks in the first 12 months of your move.

There’s an exception if you begin your new job and then move later with your family due to special circumstances. For example, if your child had to finish school near your old home before moving.

Moving Expense Tax Deduction Example

Let’s look at an example to understand better how moving expense tax deductions work:

John is an active-duty military member ordered to change the station permanently. He incurs $1,200 on temporary lodging while awaiting his permanent housing assignment. This expense qualifies under moving expense tax deduction guidelines.

After completing Form 3903 accurately and attaching relevant documentation supporting his claims, John submits it along with his annual income tax return. As a result of claiming this deduction correctly according to IRS guidelines, he reduces his taxable income.

Individuals like John can minimize their financial burden during relocations mandated by military service or other qualifying circumstances by properly understanding and utilizing options like moving expense tax deductions.

Final Thoughts

While most people are no longer eligible for moving expense tax deductions as of 2018, active-duty military personnel still have this benefit available. By understanding who is eligible, what expenses qualify, and how to apply for these deductions using IRS Form 3903, individuals can minimize their financial burden during a move. It’s essential to keep up-to-date with any changes in tax laws that may affect eligibility criteria in the future.

When you are ready to move, let us know. We have movers all over the country, and we’re ready to help. Book your move today.

Tyler Brown