Traveling Or Moving: What Expenses Can You Deduct?

Moving can be expensive, and you may be able to deduct some of those costs from your taxes. However, the rules around this have changed in recent years. For tax years 2018-2025, only certain military personnel can claim moving expenses as a tax deduction. Prior to 2018, federal tax laws allowed you to deduct moving expenses if your relocation related to starting a new job or a transfer to a new location for your present employer.

Military personnel can claim moving expense deductions

Eligible moving expenses include household goods, personal effects, storage, and travel expenses (including lodging) to your new home. Expenses for meals cannot be deducted. To claim these deductions, active-duty military members can use Form 3903: Moving Expenses, which is attached to Form 1040, U.S. Individual Income Tax Return. It is important to note that any moving expenses covered by reimbursements or paid directly by the government cannot be deducted.

Spouses and dependents of military personnel may also be eligible for moving expense deductions. This includes moves to the member's place of enlistment or induction, the spouse or dependent's home of record, or a nearer point in the United States. These moves are treated as a single move to the new main job location.

To prepare for tax filing, it is recommended that military personnel keep their receipts and log their expenses to calculate any possible deductions at the end of the tax year. Additionally, military members can seek free tax assistance through the MilTax suite of services, which provides tax preparation, filing software, and consultations with tax professionals.

Moving expenses are no longer eligible for federal tax deduction

The 2017 Tax Cuts and Jobs Act changed the rules for claiming moving expense tax deductions. For most taxpayers, moving expenses are no longer deductible on federal returns. This change is set to stay in place for tax years 2018-2025.

Who is Still Eligible for Moving Expense Deductions?

Military personnel can still claim moving expense deductions but must meet certain requirements to qualify. Active-duty military members' moves must result from a military order and permanent change of station to qualify as a deductible moving expense. In addition, military personnel must use Form 3903, Moving Expenses, to report their moving expenses.

If you moved prior to 2018, you may be able to amend a previous return to deduct your moving expenses. You can also deduct your out-of-pocket moving expenses if they exceed the amount reimbursed by the government.

While moving expenses are no longer deductible on federal returns, some states continue to provide deductions on state tax returns if specific requirements are met. Therefore, it is essential to check with your state's tax agency to determine if you can claim any deductions for moving expenses.

Moving expenses must be reasonable and necessary

When tallying the expenses you plan to claim as your moving expense tax deduction, all of them must count as both reasonable and necessary to your move.

Reasonable moving expenses may include the cost of gas or the mileage on your vehicle. For a long-distance move, you might include the cost of lodging at a hotel on the way to your new home, but you can't deduct expenses for meals.

The IRS allots a standard mileage rate of 22 cents per mile for 2023 that you can use to calculate your travel expenses. But if you prefer, you can keep up with your actual transportation costs and deduct those instead. Eligible travel costs include gas or the mileage on your vehicle.

The cost of moving expenses, according to the Internal Revenue Code, must be reasonable, but the definition of reasonable is not defined. However, Publication 521 basically indicates that expenses are reasonable if the cost of travelling from the employee's former home to their new one is by the shortest, most direct route available by conventional transportation.

The following moving expenses are considered to be reasonable and deductible:

• The cost of packing, crating, and transporting household goods and personal effects and those of members of the household from the former home to the new one. A professional moving company can be used, or the employee may use their own vehicle for moving some items.
• The cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the employee’s things have been moved from their former home and before they are delivered to the employee’s new home.
• The cost of connecting or disconnecting utilities.
• The cost of shipping an employee’s car or pets to their new home.
• The cost of moving household goods and personal effects from a place other than the employee’s former home, but the deductible portion is limited to the amount it would have cost to move it from the employee’s old home.
• The cost of transportation and lodging for the employee and members of the employee’s household while travelling from the former home to the new home. Lodging expenses include the cost of lodging for one day after the employee could no longer live in their old home and expenses incurred on the day the employee arrives in the area of their new home.

The time test for moving expenses

To qualify for the tax deduction, the timing of your move must be closely related to the start of your new employment. This means that you must start your new job and work full-time for at least 39 weeks within the first 12 months after your move.

There is an exception to this rule if you start your new job several months before your family moves to the new location due to special circumstances. For example, if your spouse is receiving medical care or your child is finishing school near your old home. In this case, you can still deduct your moving expenses even though your move occurs long after your first day of work.

The time test is one of two primary criteria that must be satisfied to count moving expenses as tax deductions. The other is the distance test, which requires that your new workplace is at least 50 miles farther away from your old home than your old workplace.

The distance test for moving expenses

To qualify for the deduction of moving expenses, the distance between your new job and your former home must be at least 50 miles farther than your previous employer is from that home. For example, if your previous commute to work was five miles each way, then the distance from your new job location to your old home must be at least 55 miles. The IRS requires you to use the shortest commutable routes between two locations when evaluating whether you satisfy the distance test.

The costs you incur for moves within the same town do not qualify for the deduction. For instance, if you lived in a home that was 20 miles away from your old job, you'll have to take a job at a new company that is at least 70 miles away from your old home to qualify for the deduction.

If you're a member of the United States military, you can claim your moving expenses regardless of the distance or employment requirements if you're making a permanent change in your military status, such as retirement or termination of service.

Frequently asked questions