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Are Moving Costs Tax Deductible? The Straight Dope and Beyond

No, generally, moving expenses are not tax deductible at the federal level. The Tax Cuts and Jobs Act of 2017 significantly altered the tax landscape, and one casualty of this change was the widely used moving expense deduction for most taxpayers.

The Deduction: A Thing of the Past?

For many years, the ability to deduct moving expenses was a valuable tax break, especially for individuals and families relocating for employment. It helped offset the considerable costs associated with packing, transportation, and setting up a new household. However, the 2017 tax law suspended this deduction for tax years 2018 through 2025.

This means that unless you fall into a specific exception (detailed below), you can’t deduct moving expenses when filing your federal income tax return. This is a crucial point because many outdated resources still reference the old rules. Don’t get caught off guard!

Exceptions to the Rule

While the general rule is no deduction, there are two significant exceptions:

Active Duty Military: Members of the Armed Forces who move pursuant to a permanent change of station (PCS) order can still deduct unreimbursed moving expenses. This is a critical benefit for service members and recognizes the unique circumstances of their frequent relocations. The move must be related to a military order and the service member must be moving to a new duty station.
Moving Expenses for Reservists: If you are a reservist and have to travel more than 100 miles away from home, you can deduct the costs.

Why the Change?

The suspension of the moving expense deduction was part of a broader effort to simplify the tax code and reduce individual income tax rates. Lawmakers argued that eliminating certain deductions would allow for lower overall tax rates for everyone. While the debate continues on the overall impact of the 2017 tax law, the removal of the moving expense deduction undeniably increased the tax burden for individuals and families who relocate for work.

Planning Your Move in a Post-Deduction World

With the moving expense deduction largely gone, strategic planning becomes even more critical. Here are a few considerations:

Negotiate with Your Employer: If you’re moving for a new job, try to negotiate a relocation package that covers some or all of your moving expenses. Many companies are willing to provide this benefit to attract top talent.
Itemize Carefully: Although you can’t deduct moving expenses, you may still be able to itemize other deductions, such as medical expenses or charitable contributions. Consult with a tax professional to determine if itemizing is beneficial for your situation.
Keep Detailed Records: Even though you can’t currently deduct moving expenses, it’s always a good idea to keep detailed records of all your expenses. Tax laws can change, and the deduction might be reinstated in the future. Accurate records will be invaluable if that happens.

State Tax Considerations

It’s important to note that while the federal deduction is suspended, some states may still allow a deduction for moving expenses on your state income tax return. Check with your state’s tax agency or a tax professional to determine if this is the case in your state. State tax laws often differ significantly from federal laws, so it’s crucial to understand the specific rules in your state.

Moving Forward: Staying Informed

The tax landscape is constantly evolving. Keep up-to-date on any changes to the tax laws that could affect your ability to deduct moving expenses in the future. Reliable sources of information include the IRS website, reputable tax preparation services, and qualified tax professionals.

FAQs: Moving Expenses and Taxes – Your Questions Answered

FAQ 1: I’m a civilian moving for a new job. Can I deduct my moving expenses?

Unfortunately, no. As a civilian moving for a new job, you generally cannot deduct your moving expenses at the federal level for tax years 2018 through 2025 due to the Tax Cuts and Jobs Act of 2017.

FAQ 2: As an active duty military member, what expenses can I deduct?

Active duty military members moving under a permanent change of station (PCS) order can deduct unreimbursed moving expenses. This includes the cost of:

Transporting household goods and personal effects.
Travel expenses (lodging and transportation) for yourself and your family.

However, you cannot deduct expenses like meals, storage fees (beyond 30 days), or expenses related to buying or selling a home.

FAQ 3: What documentation do I need to claim the moving expense deduction as a military member?

You will typically need:

Your PCS orders.
Receipts for all deductible expenses.
Form 3903 (Moving Expenses), if you itemize deductions on Schedule A.

Keep meticulous records to support your claim.

FAQ 4: My employer reimbursed me for some of my moving expenses. How does this affect my taxes?

If your employer reimbursed you for moving expenses, the reimbursement is generally considered taxable income. However, if the reimbursement is for expenses that you could have deducted as a military member, it may be excludable from your income. Consult with a tax professional for specific guidance.

FAQ 5: What if I started my move in 2017 but finished in 2018? Which rules apply?

The rules in effect for the year you completed your move will apply. Since the moving expense deduction was suspended starting in 2018, you generally could not deduct these expenses.

FAQ 6: I’m self-employed. Can I deduct moving expenses related to my business?

The rules are generally the same: moving expenses are not deductible for self-employed individuals unless you qualify for one of the exceptions (primarily the active duty military exception).

FAQ 7: Can I deduct expenses related to buying or selling a home as part of my move?

No. Expenses related to buying or selling a home, such as realtor fees, mortgage points, and closing costs, are generally not deductible as moving expenses, even for military members.

FAQ 8: Are there any tax credits available for moving expenses?

Generally, no. There are typically no specific tax credits available solely for moving expenses. However, you might be eligible for other tax credits based on your overall financial situation, such as the Earned Income Tax Credit or the Child Tax Credit.

FAQ 9: What is considered a “permanent change of station” (PCS) order for military members?

A PCS order is an order that directs a military member to move from one permanent duty station to another. This is a crucial distinction because temporary duty assignments (TDY) do not qualify for the moving expense deduction.

FAQ 10: Can I deduct the cost of temporary lodging while I’m searching for a permanent home in my new location?

No. Expenses for temporary lodging while searching for a permanent home are generally not deductible. The deduction primarily covers the direct costs of transporting your household goods and traveling to your new duty station.

FAQ 11: Will the moving expense deduction ever come back?

It’s impossible to say for sure. The Tax Cuts and Jobs Act of 2017 is set to expire after 2025. If Congress does not extend or modify the law, the tax rules could revert to those in place before 2018, which would potentially reinstate the moving expense deduction. Stay informed about legislative developments that could affect tax policy.

FAQ 12: Where can I get professional tax advice regarding my moving expenses?

Consult with a qualified tax professional, such as a Certified Public Accountant (CPA) or an Enrolled Agent (EA). They can provide personalized guidance based on your specific circumstances and help you navigate the complexities of the tax laws. Many offer free initial consultations to discuss your situation.

Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Consult with a qualified tax professional for personalized guidance.