Are My Moving Expenses Tax-Deductible?

If you plan to move soon, keep in mind that relocation is expensive and will add up to your expenses quickly. For most local moves, the moving expenses can easily exceed several hundred dollars. We are talking about the amount if you plan to move by yourself. On the other hand, the amount can increase dramatically if you hire a professional moving company. With such significant expenses, everyone will wonder if these moving expenses are tax-deductible. In 2018 most states stopped considering moving expenses as tax deductible. However, today, some states still consider them tax-deductible expenses.

It is advised to consult a financial advisor for the potential moving expenses as a tax-deductible amount. It will reduce your tax liability.

What qualifies as moving expenses tax deductions?

There are always different moving expenses incurred during the relocation process. Tax deductible eligible moving expenses include:

• Household Moving Expenses: These include the expenses that incur while moving the assets you own, such as the packing cost, the rent of the moving truck, in-transit storage, and Insurance. However, any expenses incurred to buy anything during the transit are not tax deductible.
• Storage and Insurance Cost: You often have to vacate the old premises but have yet to get possession of a new place to move your belongings. There could be several reasons for this. In that scenario, a temporary storage facility is required. You can deduct the storing cost for up to 30 consecutive days after they have moved from your old home and have not been delivered to your new home.
• Travel Cost: Travel expenses from the old location to the new one is deductible. However, meals during the travel are not deductible. Travel expenses will include airfare, lodging, and car expenses. For car expenses, you can deduct the out-of-pocket expenses, like gas and oil, or use the standard mileage rate of 16 cents per mile.

It has to be kept in mind that all moving expenses are not deductible. A few examples of nondeductible moving expenses are car tags, breaking a lease, security deposits, and losses from disposing of memberships in clubs.

Impact of the Tax Cuts and Jobs Act of 2017

Before 2018, qualifying households could deduct part or all of their moving expenses from their taxes. After the Tax Cuts and Jobs Act of 2017, this federal tax deduction is limited to military families. However, some states still allow eligible households to deduct moving expenses from their state tax liability.

Moving Expense Reimbursements

Often employers reimburse moving expenses. If you receive the moving expense reimbursement, your deduction is limited to the amount you spend above the reimbursement. If the actual moving expenses are less than the reimbursement amount, you cannot deduct any moving expenses. For example, if the moving cost is $6000, and your employer has reimbursed $4000, then you can only deduct up to $2000.

IRS Form 3903

When you file your taxes, IRS Form 3903 is the legal form to enter your moving expenses. In case you have made several moves in a single tax year. You should submit a separate IRS Form 3903 for each move.

Who Qualifies for Tax Deductions?

The only taxpayers who qualify for tax deductions are on-duty armed forces personnel who change their station due to the military order. Eligible moves include:

• A move from your home to the first post of duty.
• Moving from one permanent post to another permanent post.
• If you are leaving the military and moving to your home within one year of active duty.

Deduction off Your State Taxes

Only certain states allow their residents to deduct the moving expenses from their state income taxes, as most people cannot deduct moving expenses from their Federal taxes. A few of the states that allow deductions are:

1. Arizona
2. California
3. Idaho
4. New York
5. Utah

It is not a complete list of states that allow you to deduct moving expenses from your state income taxes. State tax laws change often, so you should consult a tax advisor to determine if you can claim this deduction on your state income taxes.

Summary:

Moving expenses are not tax deductible for the majority of the household, and only a few can benefit from this deduction. At the federal level, moving expenses are tax deductible for active armed forces personnel who receive orders from the military to move. Other taxpayers may receive a tax break at the state level, depending on where they live. If you have moving expenses, the best approach is to work with your financial advisor and tax professional to determine your eligible deductions.

Tips for Tax Planning:

• Financial advisors help clients reduce their taxable income in many ways. These strategies include maxing out retirement contributions, using tax-advantaged investments, buying tax credits, and more.
• Taxpayers can reduce their tax bills each year by contributing to a retirement account, using a Flexible Spending Account, and making charitable contributions.

To learn more about your upcoming move and how to make your relocation process a smooth one, keep visiting our blog section. EkoMovers experts continue to share their thoughts on moving that they have collected after extensive experience in the moving industry.