How To Write Off Moving Tax Deductions [and 6 FAQs]

If you are preparing to move, you may qualify for a moving tax deduction if you are an employee or are self-employed in a new location. If you are wondering “How can I write off moving expenses?”, you might be able to find some answers to your questions here. 

Due to the recent changes in law regarding relocation tax deductions, there is definitely some confusion about how to qualify for a deductible expense. Here’s what you need to know to properly claim moving expenses on your taxes:

1. What is a Moving Expense? 

Moving expenses are an adjustment to your income, but not an itemized deduction. Moving expenses reduce your gross income that is adjusted, therefore they can help you qualify for other tax benefits that have limitations at other levels of income. If this is your first time relocating, moving expenses can get confusing.

There are a few types of moving expenses that you can claim and are reasonable, such as the use of rental trucks, mileage or gas costs, insurance, packing, and temporary storage. If you are moving long distance, you can incorporate the price of staying at a hotel for one night while relocating to your new home. However, you will not be able to include any meal expenses.

The standard mileage rate, calculated by the IRS, is 17 cents every mile and can be used to calculate any travel expenses.  If you would rather, you can deduct your actual costs of transportation if you keep pace with your expenses. Travel costs for relocation that are eligible for you to use are the costs of gas, oil, tolls, or parking fees. 

2. Can You Deduct Moving Expenses in 2021?

For most taxpayers, moving expenses are not tax deductible in 2021. This means that you are no longer able to claim this moving tax deduction on your federal return. This change is effective for the tax years of 2018 to 2025. If you moved before 2018 and did not claim any moving expenses, you can most likely file an amended claim so you can deduct any moving expenses.

Since the Tax Cuts and Jobs Act (TCJA) was passed in 2017 by President Trump, many people are no longer able to deduct moving expenses on their federal taxes. TCJA makes it simple – If you moved after 2018 and are not an active member of the Military or Armed Forces, you cannot deduct moving expenses.

The TCJA suspended the moving tax deduction for unreimbursed employee expenses, including the costs of relocation that are not able to be reimbursed by your employer or a third party, like a government agency. The suspension of this act is temporary and can return in the near future, depending on when congress decides they want these provisions back.

It is important to know that you cannot deduct any tax expenses that are paid for or reimbursed at first hand by the government. You will need to fulfill two more benchmarks, the time tests and distance tests, in order to possibly count the expenses as a tax deduction.

3. Can You Deduct Moving Expenses as an Active Military Member or Armed Forces Member?

If you are an active duty military member, you are able to claim a relocation expenses tax deductible. You will need to include those expenses on form 3903 and attach them to form 1040. 

If you are a member of the Armed Forces and want to claim moving expenses as a deduction on your tax return, your move needs to be the result of a change of station that is permanent and an order from the Military. You are able to deduct your moving expenses that are not reimbursed for yourself, your spouse, and any dependants you might have.

4. What Form Do Active Military Members Use?

Any Military personnel are to use form 3903 to outline their relocation expenses, such as any shipping and storage costs, travel, hotel stays, and gas costs. Any employer reimbursements will be noted on line 4 and reimbursements for costs on both the 1st and 2nd lines that aren’t included in the 1st box of your W2 should go on the 4th line.

In case you have your W2 on hand to verify this, what you state on the 4th line should appear in the 12th box (code P). These specific directions are included on Form 3903 as well. If the amount you are being reimbursed surpasses your complete out of pocket expenses, you will not be able to deduct your relocation expenses.You will have to claim the additional reimbursement as a taxable income. If your personal expenses exceed the amount reimbursed to you from your employer, you can deduct your out of pocket moving expenses as taxable income.

5. Do you qualify for the time test?

In order to be eligible for the time test, you need to work as a full time employee in your new community for a minimum of 39 weeks throughout the first year after you move to your new area. You can have more than one job included in those 39 weeks.

If you are self-employed, it is necessary for you to work 78 total weeks throughout the first 24 months after you have arrived in your new area, while still working a minimum of 39 weeks during the first 12 months. If you are married, only you or your spouse need to meet the time test.

The only exception for having to meet the time test is if you begin a new job a few months before the rest of your family moves to your new area because of a special circumstance, like if your spouse is currently receiving medical care or your child is finishing up school for the year near your old home.If you have a special circumstance, you can deduct your moving expenses even though your move happens a while after your first day of work.

6. Do you qualify for the distance test?

To qualify for the distance test, the distance from your old home to your new place of work needs to be at least 50 miles further than what the distance from your old home to your old place of work was. If you are married, only you or your spouse need to meet the distance test. 

If you are an active member of the Military or Armed Forces, you are able to claim your moving expenses. No matter what your distance or requirements of your new job are, if you are making a permanent change in your military status, such as retirement or terminating your service, you can still claim moving expenses.

You may be able to qualify for an exception to these two rules if you get terminated from your job. If you are a member of the Armed Forces or active member of the Military, you don’t need to meet either of these tests if your move is a permanent station change or if you move one year after retirement or you are no longer on active duty.

Final Thoughts

If you are planning to move and are looking for the right moving company to help you get to your new location, get an ARC Relocation and let us make your move easier for you.