The Moving Expenses Deduction: A Comprehensive Guide
Moving can be an exciting yet stressful experience. Whether you’re relocating for a new job, starting a family, or simply seeking a change of scenery, the costs associated with moving can quickly add up. However, there is some good news – you may be eligible to claim a moving expenses deduction on your taxes.
What is the Moving Expenses Deduction?
The moving expenses deduction allows taxpayers to deduct certain costs incurred during a move if it meets specific criteria set by the Internal Revenue Service (IRS). This deduction applies to both individuals and self-employed individuals who meet the requirements.
To qualify for this deduction, your move must meet two tests:
1. Distance Test: Your new workplace must be at least 50 miles farther from your old home than your previous workplace was from your old home. For example, if your old workplace was 10 miles away from your old home, then your new workplace needs to be at least 60 miles away from that same old home.
2. Time Test: You must work full-time in the general vicinity of your new workplace for at least 39 weeks during the first 12 months following the move. If you are self-employed, you must work full-time in the general vicinity of your new workplace for at least 78 weeks during the first 24 months following the move (with at least 39 weeks occurring in each year).
Eligible Expenses
Now that we have covered who qualifies for this deduction let’s dive into what expenses are eligible for claiming:
1. Transportation Costs: This includes reasonable expenses such as gas mileage (at IRS-approved rates), tolls, parking fees, and vehicle rental fees incurred during transportation to reach your destination.
2. Packing and Shipping Costs: The cost of packing materials and shipping household goods and personal belongings is deductible as long as they are used within one year after arriving at their destination.
3. Storage Costs: If your move requires temporary storage of your belongings, expenses for up to 30 consecutive days are eligible for deduction.
4. Travel Expenses: When moving long distances, you can deduct travel-related costs such as meals and lodging incurred while traveling from your old home to your new home. However, only one trip per person is allowed.
5. Utility Connection/Disconnection Fees: The cost of connecting or disconnecting utilities at the new and old residences can be claimed as a deduction.
6. Moving Insurance: Premiums paid for insurance coverage related to the move are also eligible expenses.
Expenses Not Eligible for Deduction
Not all moving expenses can be deducted on your tax return. Here are some examples of non-eligible expenses:
1. Home improvements or repairs made before selling your old home.
2. Real estate taxes.
3. Losses from selling or buying a home.
4. Security deposits (including any lost due to a breach in the lease).
5. Expenses reimbursed by an employer through a non-taxable allowance or reimbursement arrangement.
How to Claim the Deduction
To claim the moving expenses deduction, you must complete Form 3903 – Moving Expenses and attach it to your federal income tax return (Form 1040). This form will help you calculate the total amount of allowable deductions based on eligible expenses incurred during your move.
It’s essential to keep detailed records and retain supporting documents such as receipts, bills, contracts, and other relevant paperwork that provide evidence of these expenses in case they are requested by the IRS later on.
Recent Changes in Tax Laws
It’s important to note that with changes in tax laws introduced by The Tax Cuts and Jobs Act (TCJA) passed in December 2017, there have been significant modifications regarding moving expense deductions starting from January 1st, 2018 until December 31st, 2025:
Under TCJA provisions, moving expense deductions are only available to active-duty members of the Armed Forces if the move is due to a military order.
Additionally, employers are no longer allowed to provide tax-free reimbursements or allowances for employee moving expenses (with the exception of active-duty military personnel).
Conclusion
Moving can be an expensive endeavor, but knowing that you may qualify for a moving expenses deduction can ease some financial burden. By understanding the eligibility criteria and keeping track of deductible expenses, you can potentially reduce your tax liability and enjoy some relief when it’s time to file your taxes.
However, it’s always recommended to consult with a qualified tax professional or CPA to ensure compliance with current tax laws and maximize your potential deductions.