Are you excited about your upcoming move? You should be! Moving house is a major event in your life. More than just a change of scenery, it’s a chance at starting something new and hopefully better. But it happens to come with a price tag. From closing on a house to renting a moving truck Brooklyn, moving costs can certainly pile up. All in all, a relocation can set you back thousands of dollars. Luckily, you may be able to get a tax deduction on some of your spending. And if you’re looking for information on how to claim moving expenses, you’ve come to the right place!
Who can claim moving expenses?
Prior to the tax year 2018, almost everyone relocating for a job could claim at least some of their moving expenses as long as they met certain distance and time requirements. However, that all changed in December 2017. This is when the Tax Cuts and Jobs Act was passed. It severely limited the eligibility for tax deductions on relocation expenses to members of the Armed Forces on active duty moving due to a military order because of a permanent change of station.
So why should you care at all about how to achieve it if this doesn’t apply to you? Well, the good news is that the TCJA provision isn’t meant to be permanent. Rather, it is a suspension on moving expense deductions for tax years 2018 through 2025, when it will expire if it isn’t written into permanent law. So knowing whether you qualify for claiming moving expenses based on the rules from 2017 may still come in handy in the future!
Does your move qualify for a tax deduction?
According to the IRS for your move to qualify for tax deductions, it must meet the following criteria:
- the move closely relates to the start of work
- it meets the distance test
- it meets the time test
Correlation to start of work
In order to claim the deduction of moving expenses, you must be moving in correlation to starting a job. This means that your first day of work at the new location has to happen within a year prior to or after relocation. For the sake of the argument, let’s say your moving day is April 20th, 2026. You must either start working by April 20th, 2027 or have already started working no later than April 20th, 2025.
The only exception to this rule is if you work outside the US, retire and move back to the US after that. Although you are not starting new work, you will qualify for tax deductions on moving expenses.
You pass the distance test if your new job location is at least 50 miles farther away from your old home than your old job location was. This is a bit confusing, so we’ll use an example again. Let’s say you currently live and work in Miami and the distance between your home and your job is 15 miles. But you’re buying a home for the first time in NYC because you’ve found employment there. The distance between your Miami home and your new job in New York is approximately 1,200 miles. This is far more than 50 miles and therefore passes the distance test.
Under both the old rules and the new, military personnel is not required to meet the distance test.
It’s not enough to start working within a year of your move to claim the cost of moving expenses. You must also work for a certain amount of time to qualify. This means working either:
- full-time as someone’s employee for at least 39 weeks during the 12 months following your move, or
- full-time as self-employed for at least 39 weeks during the 12 months following your move and at least 78 weeks during the 24-month period following your move.
Military personnel, retirees who worked abroad and surviving dependents are once again exempt from this rule.
What can you claim as moving expenses?
Not all moving costs are deductible, but plenty of the major ones are. So when you hire reliable movers in Brooklyn, keep the receipt!
Here are some things that are tax-deductible:
- professional movers
- transportation expenses (for both yourself, your family and your pets)
- storage fees
- costs of packing and shipping household items
- lodging during long distance moves
And here’s a few things that you can’t claim moving expenses on:
- the costs of buying or selling the property
- vehicle registrations and licenses
- expenses related to home improvement on your old or new house
- meals during the move
- anything already reimbursed by the new employer when moving for a specific position
How much can you claim?
There is currently no limit on how much you can claim for moving expenses. So if the cost of living in your new home worries you, try to get a tax deduction on everything you can. You may want to keep documentation on all moving expenses if dealing with larger sums of money.
What will you need for claiming moving expenses?
It is not necessary to itemize moving costs in order to deduct them, but it is still advisable to keep all the relevant documents just in case as you may need to provide proof of your expenses. The one exception is travel expenses. Every year, the IRS determines a standard mileage rate used to calculate those. You can, of course, still, submit your own receipts if that pays off more. Besides the obvious bills and receipts, credit card statements, mileage logs, and other important moving documents can all be of use.
Where and how do you claim moving expenses?
You will need to file Form 3903 specifically for moving expenses. The calculations recorded on this form are also entered on line 26 of Form 1040 (the 2017 version of it anyway, latest which allowed tax deductions on moving expenses for non-military personnel).
If you’re still not sure whether you can claim moving expenses on your move, you can complete a 9-minute interview on the IRS website which helps determine if your move qualifies and how much you can deduct.