Are you relocating to a new place due to work? Well, if that’s the case then you surely need to check up on the recent tax rules and regulations for moving expenses. If you’ve been thinking that you can claim a deduction for your moving expenses from your federal income taxes, you might want to brush up on the new rules. As the TCJA (Tax Cuts and Jobs Act) has come into effect, it restricts you from claiming your moving expense deduction.
Don’t know how these tax reforms will affect your move? To get you updated with the previous and the new law, we have covered everything in our guide to IRS moving deductions. So keep reading to know who all can still claim to deduct their moving expenses on their taxes.
IRS Moving Deductions Before Tax Reform
The TCJS (Tax Cuts and Jobs Act) came into effect in the year 2017 and since then has affected businesses and people who wanted to relocate because of work. This law restricts you from claiming any kind of moving expense post 2017. That said, it has also lowered the tax rates for a few people. The moving expense deduction began in the tax year 2018 and will continue to be in effect till the year 2025 with military personnel and their spouses as an exemption. Now before the TCJS came into effect, you were allowed to claim moving expense deductions on your taxes. But the IRS allowed this claim only if the reason for moving was job related. You had to fulfill the following requirements in order to claim moving deductions:
Relocation Within 1 Year Due To Work:
You could claim your moving expenses deduction if at all you relocated within one year from the time you start working at your new job location. In a different case, even if you moved your belongings from your old home to your new job location within the time period of one year, you could still claim for relocation expenses.
Exceptions: You didn’t necessarily have to relocate within one year if you had worked outside of the U.S and then came back after retiring. It was still possible for you to claim your deduction even if you had not started to work at a new location.
The Time Test:
If you were a full time employee devoting at least 39 weeks for your work within one year of moving, you could deduct moving expenses from your taxes. In a slightly different scenario, if at all you were self-employed but devoted at least 39 weeks for your work within one year of moving, you could still claim deduction on moving expenses.
Exceptions:
- If you worked outside of the U.S and came back after retiring, you were exempted.
- If you are a spouse of a person who is dead but worked outside of the U.S and relocated back to the U.S.
- If at all you lost your job at your new location after becoming disabled.
- If you were transferred you to a new location to benefit your company.
The Distance Test:
The distance test required you to measure the distance from your old house to your new job location and also the distance from your old house to your old job location. In order to claim the moving deduction, the distance of your new job location should be at least 50 miles more than the distance from your old home to your old job location.
For example, let’s assume the distance from your old house to your new job location as X and the distance from your old house to your old job location as Y. So in order to claim the deduction, the distance of X has to be at least 50 miles more than the distance of Y.
Allowances For Moving Deductions:
If at all you met any of the above requirements, you could claim for moving expenses deduction to a certain extent. The dedication included the following kind of moving expenses:
- Expenses for hiring moving or packing companies.
- Expenses for hiring trucks.
- Expenses for packing materials.
- Expenses for getting insurance for your items.
- Expenses for connecting and disconnecting utilities because of your move.
- Expenses for moving your car.
- Expenses for storage upto 30 days after your move.
- Expenses for transportation.
Other than the things mentioned above, the deduction for moving would not include your meals or housing costs. You can use our Moving Cost Calculator to calculate expenses of your move.
Also See: IRS Moving Expense Deductions – A Detailed Guide
IRS Moving Deduction After Tax Reform
Unfortunately you cannot claim for tax deductible moving expenses anymore even if you’re moving for work. The reason being the suspension of the moving expense deduction by the IRS. But military personnel are exempted from this suspension. That means you can get a deduction on your moving expenses from your federal tax income only if you are an active member of the U.S military.
Important Note: If you are a member of the U.S Armed Forces, you can figure out your moving expense deduction through the Form 3903. After you are qualified to deduct moving expenses for more than one move, you will have to use a seperate Form 3903 for each of the moves.
When Can A Military Member Claim A Moving Expense Deduction?
- You can claim for your deduction within one year of moving if you’re moving because of ending your duty.
- In case you’ve died, have been imprisoned or you have deserted your post, your spouse or dependents can still claim your moving expense deduction. It will include expenses related to all of your household.
- The claim is still applicable to you if at all you have to move to your first post from your home, from one post to the next one or from your final post to your home.
Important Note: As a U.S military member, your moving expense deduction will only cover your expenses to move the belongings of your home and lodging in route but not your meals. Also, if the government has already reimbursed your expenses such as your housing expenses, you cannot claim for a deduction on them.
Also See: Best Moving Companies for Military Moves
Items that cannot be deducted from your moving expenses:
The IRS does not include the following things for all your moving expense deductions:
- Cost for the purchase of your new home.
- Cost for your vehicle registration and new driver’s license.
- Cost for buying or selling a home which may include mortgage fees or closing costs.
- Cost for your real estate taxes.
- Cost for your lease or security deposits.
- Cost for return trips to your former residence.
- Cost for storage charges except for foreign moves.
How To Claim A Moving Expense Deduction In 2020?
You don’t have to worry about how you can get a claim for your moving expense deduction as the process is almost the same for the 2019 and 2020 tax forms. The only difference is that because of the changes the lines are different. In the 2019 and 2020 Schedule 1 Forms, you’ll see the deduction mentioned on Line 13. Apart from that, all of the total of your adjustments to your income are on Line 22 of Schedule 1. After that, this total is then entered either on Line 8a of the 2019 Form 1040 or on Line 22 of 2020 tax return.
Important Note: An important thing that you should make a note of is that the federal laws keep changing or revising frequently. So in order to know the most recent changes and whereabouts of taxes and moving deductions, you should check the IRS’s official website.
Frequently Asked Questions:
What qualifies as moving expenses IRS?
If you’re claiming a moving expenses deduction, you can deduct costs for moving your household belongings, hauling a trailer, packing, crating, in-transit storage or the insurance for your items. But remember that you cannot deduct costs for moving your furniture or any other items that you purchase after moving from your old house to your new home.
How can you save money while moving without tax deductions?
Although moving expense deductions are applicable only to U.S Armed Forces, there are still many ways through which you can still save money while moving.
- Plan a DIY move instead of hiring professional moving companies.
- Pack your belongings by yourself.
- Search for discounts on moving boxes on Craigslist, U-haul or any other platform. You can also hunt for free or cheap moving boxes from local grocery or liquor stores.
- Plan and execute your move on a weekday instead of a weekend when moving companies are the busiest and costliest.
- Discard or donate unwanted items which you don’t want to take along with you to your new home.
Also Read: How Much Does it Cost to Move? | List of Affordable Moving Companies
