Alex is the founder of 9Kilo Moving, which he started to help people easily find and choose the right moving company to make their move as stress-free and seamless as possible. He has spent over 20 years working in the moving industry, so he knows every aspect of the business and uses his knowledge to write about the industry and give moving advice. More on about us page
There was a time when people used to save their moving
company receipts and bills to claim deductions on moving expenses. Now that you
reflect back on it, those were the good days. Those deductions proved as relief
from all the dollars spent on moving. Anyone who has moved homes will be
shaking their heads right now because moving is a pricey affair.
But allow us to burst the bubble, moving expenses are no longer tax-deductible, thanks to the federal government for its Tax Cuts and Jobs Act (TCJA) passed in 2017. In simple terms, you can claim no tax deductions if you are planning a move in 2021. However, there are a few exceptions, and if you fall in those categories, this article will definitely help you:
CALCULATE MY MOVE
The tax changes did not affect the ones in active military
duty. You can have those moving expenses deducted from your federal returns if
you serve the armed forces. But there’s a catch: this deduction is possible
only if you moved because of a military order or a permanent change of station.
The unreimbursed expenses can also be deducted for your spouse or any
In case you moved anytime before December 31, 2017, you can
claim that deduction. But nothing for moves post that date. Many people claim
their tax benefits in the same financial year. Only if you haven’t, will you be
eligible for deductions, but only till three years after you filed that return.
Though most state governments follow the footsteps of the
federal government, there are some US states that update their income tax rules
by legislation. As of July 2019, only 7 states namely Arkansas, California,
Hawaii, Massachusetts, New Jersey, New York, and Pennsylvania allowed moving
tax deductions. Even amongst these states, rules for deductions can vary, take
for instance New York and California, which exclude qualified employer moving
expense deductions. So it’s always a good idea to ring up your accountant for
better clarification on your state’s income tax return policies.
If you do fall in any of the above brackets, you can
actually claim your rightful reimbursement. But hold on, there is a lot more to
know, like the rules to qualify for moving expense deduction.
The costs that you claim deduction on should be reasonable
expenses. No one is reimbursing the money spent on those takeaways you ate
while moving. Only those expenses incurred on move are deductible like
shipping, truck rental, storage units, or moving supplies. There is good news
for students, if you are moving furniture or heavy appliances from your
parent’s home, those costs too will be covered!
Everything, right from hiring a professional moving company to shipping your pets will be considered for deduction. Car or airfare expenses that you incurred while traveling to your new home will be considered. This includes gas, toll, and parking. But don’t expect maintenance or general repairs to be included. Airfare is reimbursed but only if you traveled a direct route and did not stray away for a vacation in the middle.
IRS Moving Expense Deductions
If you have moved for the reason of work, there are a ton of
factors that come into play. Like the distance of your new workplace from your
new home. The commute from your old home to your new job was 50 miles longer
than the commute from your old home to your old job. Let us make it simple,
suppose you commuted 10 miles from your precious home to your previous job.
Now, your new workplace is 100 miles away from your previous home, which is
obviously more than 50 miles. Do the math and you’ll know you are traveling 90
miles more from your old home to reach your new workplace. This means you are
eligible for a deduction.
You should relocate to your new home within 12 months before
or after you start your new job. To top that, you are required to work for your
new employer for at least 39 weeks after the move. The same goes if you are
self-employed, but only if you are working full time in self-employment. But
all this doesn’t apply to you if you work in the military.
Active duty military people don’t have to meet the distance and time requirements towards deductions. Any move between duty stations or move due to a permanent change of station is considered for reimbursement. Even the ones who are retiring and moving from a final duty station to retirement can claim their deductions. Moving expenses incurred like traveling expenses, hiring movers, and temporary lodging during the move are up for deductions on tax returns. When it comes to expenses on meals, it’s the same as for the civilians, no reimbursement on those!
Once you are sure you can claim a deduction, check out IRS
Form 3903. You can record your deductions on this form. Simply go to line 26 of
the 2017 Form 1040 and enter the result. You can even avail such a deduction if
you itemize your deductions or go for a standard deduction. Go ahead if you
want to consult your accountant before filing this form or delegate the work
entirely to the accountant.
Military personnel too should report their moving expenses
in Form 3903. The costs incurred for shipping and storing your personal
belongings go to line 1 of Form 3903. The expenses of traveling like your car
gas cost or airfare, plus the lodging expenses go to line 2. For tax deductions
for years after 2018, Form 1040 Schedule 1 is the place to record your
There are tax deductions on moving expenses for business
owners too. If you are a business owner and moving your business to a new
place, you can claim reimbursement on expenses incurred to move inventory and
business equipment from one location to another. Moreover, the cost of renting
or buying a new office for your business too is reimbursable under this. In
case you are moving for the purpose of setting up your business in a new
location, your personal expenses relating directly to the business could also
be deductible. It’s always better to run it through your accountant though, to
benefit the most from this.
In case you don’t qualify for any tax deduction and your employer won’t reimburse you, turn to conscious steps into saving money. From hunting for free packing supplies to eliminating professional movers, here are ways to reduce expenses if you aren’t eligible for tax deduction:
The number of expenses that are involved in relocation can
be daunting. Tax deductions on moving expenses act as a huge benefit. If you
aren’t in the military, do your research and find out if your state has any
deductions. Even after this, if you cannot get a deduction, try adopting the
tips we stated above to cut on moving expenses. Budgeting for your move is the
best decision you can make.
Can I Still Deduct
Moving Expenses from 2018 on My Federal Tax Return?
If you haven’t claimed your benefits on moving expenses from
a move before 2018, revisit your return. According to the IRS, you can amend a
return for three years after filing it or a period of two years after the date
you paid your taxes (whichever is the later among the two.) But the three-year
period is running up soon, so hurry to amend that return.
Can I Get A Tax
Deduction On Moving If My Employer Already Reimbursed Them?
There are companies that reimburse their employees for their
moving expenses. So if you moved for work, and you have already been reimbursed
by your employer, then that tax deduction is not for you. Rather, the moving
reimbursement paid by your employer is now included in your gross income. They
end up increasing your tax bill since they were included in gross income.
Which Moving Expenses Are Not Deductible?
We already shed light on zero reimbursements on meals, but there are other things that are not deductible. The trips you took to research for new homes, purchasing your new home, signing the new rental lease, remodeling upgrades to your new home, and the cost of returning to your previous home after you have already moved are all non-deductible expenses you will incur. Remember this right from the start so you keep a track of your expenses without being under any illusion.
Moving expenses are not tax-deductible for most people. There are certain exceptions, such as working in the military and formally moving due to a PCS order or deployment orders.
The IRS has announced that the new Tax Cuts and Jobs Act will suspend any potential for taxpayers to deduct their 2019 moving expenses. It's unfortunate, but this is one expense you can't itemize unless it was incurred before Jan 1st, 2018.
The average American moves eleven times in their lifetime, and the cost of these changes can be substantial. Non-deductible moving expenses are all those costs that you have to pay for out of pocket, including car tags, dog licenses, driver's license, or club fees when settling into your new home; security deposits lost at the old place; actually breaking a lease at the old abode (you'll want to check with whatever jurisdiction is pertinent); closing costs if selling an older property or buying a newer one - mortgage fees come included!
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