Can You Deduct Moving Expenses On Taxes
Can You Deduct Moving Expenses On Taxes

Can You Deduct Moving Expenses On Taxes

Can You Deduct Moving Expenses On Taxes – If you moved from one city to another for work before 2018, you usually got a tax break: the related out-of-pocket expenses were likely deductible from your federal income taxes. As of 2018 (and at least until 2025), this is no longer true, unless you are a qualified member of the armed services.

The tax reform measure passed by Congress in December 2017 increased the standard deduction for most U.S. taxpayers, but also eliminated or reduced several miscellaneous deductions that could be used to reduce tax liability. The out-of-pocket deduction for moving expenses was one of the casualties of these tax changes.

Can You Deduct Moving Expenses On Taxes

As explained in more detail in the 2018 IRS Form 3903 instructions, the only U.S. taxpayers who can claim tax deductions for moving expenses are active-duty military members moving on permanent change of station orders. Qualified expenses include costs related to moving personal and household goods and travel costs associated with the move, including an allowance for personal vehicle travel at 18 cents per mile.

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The tax reform law, formally known as the Tax Cuts and Jobs Act of 2017, went into effect on January 1, 2018. That means if you moved for non-military work in 2018 — or if you ever will until 2025, when the 2017 provisions expire unless Congress extends them — you can’t deduct those moving expenses.

Before 2018, you can deduct expenses related to a work-related move, provided your move meets the following conditions or “tests”:

The 2017 tax reform also changed how payments made by employers to employees to cover moving costs are taxed. Before 2018, those reimbursements were treated as “above-the-line” deductions from taxable income: even if you didn’t claim any itemized deductions on your tax return, you could still deduct moving expenses from your gross income before calculating taxable income . Not under the new tax law: You now have to declare those refunds as income and are subject to tax.

An important exception to this could provide tax relief in 2018 for a few select taxpayers: if your employer reimbursed you in 2018 for a move you completed in 2017, you don’t have to pay tax on that amount. Details about this exception are outlined in an IRS guidance note.

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These tax changes indirectly increase the cost of relocating for work, and you should plan accordingly if a move is in your future. Or sit tight until 2025 and see if Congress allows the old deductions to kick in.

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Can I Deduct Moving Expenses?

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Changes To Work Related Deductions

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Not so fast. Even though this cunning plan didn’t seem like more trouble than it’s worth, the IRS has rules about which moving expenses are tax deductible and which aren’t. Those moving expenses you have when you’re tired of living with your ferret roommate and finally save up for a security deposit on a basement studio down the street: those are gone. But if your move is the result of a new job or job relocation, get out your calculator, because you can definitely wipe out a lot of what you’re spending on moving.

The rules are pretty clear and not as strict as you might imagine. The bottom line is that moving expenses can be deducted as long as the move is for a new job or business. However, you will need more than just a change of address card; you must qualify based on one of two criteria. The first is the time test, which states that you must work 39 weeks in the 12 months after you arrive in your new location. (If you’re moving at the end of the year and expect to meet the 39-week requirement after taxes are due, you can also claim it — but you’ll need to file an amendment if you don’t.)

Not up to the test of time? Don’t give up hope just yet. You may still meet the distance test, which says that your new job is at least 50 miles (80 kilometers) further from your former home than your old job was. So if your old job was 10 miles (16 kilometers) from your old home, your new job must be 60 miles (96 kilometers) or more from your old place.

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One more thing: All of these moves must be closely related to the new job, both in terms of when you move and where you move. So if you decide to grind your teeth through a massive commute for a few years while saving up for a

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