When you move from one home to another, these expenses can add up quickly. For many households, moving costs can be thousands of dollars, even if you do most of the work yourself, and hiring a moving company can increase those costs dramatically. With such a big expense, many people wonder if moving expenses are tax-deductible. While moving expenses stopped being tax-deductible for most households in 2018, some states still allow this deduction. You can work with a financial advisor to properly plan for potential tax deductions to possibly limit your tax liability.
Moving Expense Tax Deductions
What qualifies as a moving expense? There are many different types of costs that happen when you move. Eligible moving expenses for you and members of your household include:
- Moving household goods and personal property: The expenses related to moving items that you own, such as hauling a trailer, packing, crating, in-transit storage and insurance. However, you cannot deduct expenses related to items that you buy on the way to your new home.
- Storing and insuring your items: Although your items may arrive in your new city, that doesn’t mean that you or your new home are ready to receive them. You can deduct the cost of storing and insuring your items for up to 30 consecutive days after they are moved from your former home and before they are delivered to your new home.
- Travel expenses: Travel expenses from your old city to your new city are deductible. This includes airfare, lodging and car expenses. However, meals while traveling between cities are not eligible. For car expenses, you can deduct the actual out-of-pocket expenses, like gas and oil or you can use the standard mileage rate of 16 cents per mile.
Unfortunately, not all moving expenses are tax-deductible. Nondeductible expenses cannot be deducted. There are many different types, but a few examples are car tags, breaking a lease, security deposits and losses from disposing of memberships in clubs.
Impact of the Tax Cuts and Jobs Act of 2017
Prior to 2018, qualifying households could deduct some or all of their moving expenses from their taxes. After the Tax Cuts and Jobs Act of 2017, this Federal tax deduction is limited to military families. However, some states still allow eligible households to deduct moving expenses from their state tax liability.
Moving Expense Reimbursements
If you receive reimbursement for your moving expenses from your employer, your deduction is limited to the amount you spend above the reimbursement. When your moving costs are less than the reimbursement, you cannot deduct any moving expenses. For example, if it costs $10,000 for your move and your employer provides reimbursement of $8,000, your maximum deduction would be $2,000.
IRS Form 3903: Moving Expenses
When you file your taxes, you’ll document your eligible moving expenses on IRS Form 3903. If there are multiple moves within one tax year, you should complete a separate IRS Form 3903 for each move.
Who Qualifies for this Tax Deduction?
The only taxpayers that qualify for deducting moving expenses are active duty members of the Armed Forces that make a permanent change of station due to a military order. Eligible moves include:
- A move from your home to your first post of duty.
- Moving from one permanent post to another permanent post.
- Leaving the military and moving to another home within one year of the end of your active duty (or within the period allowed under the Joint Travel Regulations).
Deductions off Your State Taxes
While most people cannot deduct moving expenses from their Federal taxes, it is possible to deduct them from your state income taxes if you live in certain states. A few of the states that allow this deduction include:
- New York
This list does not include every state that allows you to deduct moving expenses from your state income taxes. State tax laws change often, so you should consult with a tax advisor to determine if you can claim this deduction on your state income taxes.
The Bottom Line
While moving expenses are not tax-deductible for most households, there are some taxpayers that can benefit from this deduction. At the Federal level, moving expenses are tax-deductible for active duty members of the military who receive orders to move. Other taxpayers may be able to receive a tax break at the state level, depending on where they live. If you have moving expenses, the best approach is to work with your financial advisor and tax professional to determine what deductions you are eligible for.
Tips for Tax Planning
- Financial advisors help clients reduce their taxable income in many ways. These strategies include maxing out retirement contributions, using tax-advantaged investments, buying tax credits and more. Finding a financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Taxpayers have many options to reduce their tax bills each year, like contributing to a retirement account, using a Flexible Spending Account, and making charitable contributions. Using our free Federal Income tax calculator, you can estimate your taxes owed based on your income, location and deductions.
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