Although moving expenses were usually tax-deductible if you were headed to a new place over 50 miles away for generalized work purposes, that structure changed in 2017.
Beginning with the Tax Cuts and Jobs Act, the rules for claiming the moving expense tax deduction change. The new structure makes it so that most of the costs in this area are no longer eligible for a deduction.
The change of rules started with the 2018 tax year. It’s currently scheduled to expire in 2025.
If you need to amend a previous return filed for 2017 or earlier, you might still qualify for the last deduction if you didn’t claim eligible expenses.
You can also qualify for moving deductions if you meet specific stipulations or service in the active military.
The IRS offers an online guide that can help you to determine if your moving expenses are something you can deduct.
What Are the Rules to Follow for Moving Expenses?
If you moved in 2020 anywhere within the United States from one home to another, the Tax Cuts and Jobs Act of 2017 does not permit the deduction. The only exception to that rule is if you are serving in the military.
Were you a military member on active duty and moving because of a permanent change station (PCS)? If so, the IRS will ask you about the expenses you paid out of pocket to determine your eligibility.
Here are some examples of the costs you’ll want to review if you find yourself in that situation.
- Crating, packing, and transporting household goods.
- Connecting and disconnecting utilities.
- Cost of shipping pets or vehicles to your new home.
- Cost of moving personal effects and household goods from a place other than a former home.
- Storage and lodging expenses.
Here’s the catch. If you decide to drive across the country as part of your move without using the military’s service provider to handle your PCS, some or all those costs might not qualify for the moving deduction. You might drive from one point to the other without side stops or sightseeing opportunities.
You’ll need to use Form 3903 to determine your moving expense deduction under the Tax Cuts and Jobs Act.
If you receive any moving reimbursement funds or benefits from an employer to facilitate your relocation, the costs you experience might not qualify for a tax deduction.
What If I Moved Before 2018 and Need to Change My Taxes?
When you need to correct your tax documentation from before 2018 because you forgot to include your moving expenses, you can still qualify for a deduction under the previous rules. You must file an amended claim to complete this process.
The first step of the moving deduction calculation is to determine if you qualify under test rules. You must meet the standard of having a new job start working full-time hours for at least 39 weeks within the first 12 consecutive months after moving.
If you start your new job several months before your family moves because of qualifying circumstances, a waiver might apply to the time test. Kids who are finishing school at your previous home or family members who require medical care often meet the expected standard.
In that situation, you can still usually deduct moving expenses even though your employment started long after getting into the new place.
You Must Also Meet a Distance Test
After you’ve passed the time test, you must also consider the distance between your new workplace and your old home.
Your new place of employment must be at least 50 miles away from your old home than your previous workplace. If you lived somewhere that was 15 miles away from your last employer, you’d need to take a job that was 65 miles or more from your previous address.
The issue that trips people up here is that they think moving expenses are deductible if they are more than 50 miles away. If there isn’t a new employer in the picture, the claim could be invalid.
Freelancers run into this issue all the time. If you work full-time at home, it doesn’t matter where your office is located because it travels with you. Since you’re zero miles from where you work at either residence, you wouldn’t qualify under the distance test.
The difference for a freelancer is that if their work is structured as a business, they can still deduct certain expenses related to the relocation.
If you do qualify for distance and don’t for time, you’re still ineligible.
This content doesn’t serve as legal advice. If you have specific questions about your situation, please speak with a qualified tax professional in your community.