Did you recently move for a job or another big life change? You might be wondering if you can claim a moving expense deduction on your taxes. Let's break down the current rules and help you figure out if you qualify for this tax benefit.
Can You Deduct Moving Expenses?
Most taxpayers don't qualify for a moving expense deduction anymore, thanks to changes from the Tax Cuts and Jobs Act (TCJA) of 2017. This act suspended the moving expense deduction for most individuals from 2018 through 2025. However, there are some notable exceptions:
- Active-duty members of the U.S. Armed Forces who move due to a military order.
- Spouses and dependents of active-duty military members, provided the move is associated with the military service.
If you don't fall into these categories, you will generally not be able to deduct moving expenses on your federal tax return during the suspension period.
Military Members: What You Need to Know
For active-duty military members and their families, the moving expense deduction can still provide significant tax savings. Here's what qualifies:
Qualifying Moves
To qualify, the move must be:
- Due to a military order requiring a permanent change of station.
- For reasons such as a move from your home to your first post of duty, from one permanent post of duty to another, or from the last post of duty to a home or a nearer point in the U.S.
Deductible Expenses
The costs you can deduct include:
- Transportation and storage of household goods and personal effects.
- Travel expenses for yourself and family members, excluding meals, from your old home to your new home.
Recordkeeping
Keep detailed records of your move, including:
- Mileage logs, if you're driving.
- Receipts for any transportation and storage costs.
- Copies of new and old lease agreements or property deeds to establish the necessity and distance of the move.
The New Job Trap: What About Non-Military Moves?
If you're not in the military but moved for a job change, you might wonder if any tax relief is available. Unfortunately, the answer is generally no until post-2025 unless Congress decides otherwise. The suspension by the TCJA means most job-related or personal moves will not yield federal moving expense deductions.
Some states, however, haven't conformed to federal changes and may still offer a state-level deduction. Check your state's tax rules to see if you might benefit locally.
Considerations for Employers
If you're an employer considering reimbursing an employee's moving expenses, note:
- After the TCJA, any reimbursements made to employees must be included in their taxable income. This means more payroll taxes and a higher taxable income for the employee.
It's worth exploring the possibility of optional employee gross-up payments, where you cover the taxes on the reimbursement to mitigate the financial impact on the employee.
Moving Forward
Navigating the complexities of moving and how it affects your taxes can be tough, especially with these recent changes. If you're in the military or are exploring state-specific deductions, having personalized advice can be invaluable.
Consider scheduling a consultation with Financial Ace 1040 LLC to understand fully how a move impacts your tax situation and ensure you're optimizing your financial position while complying with current laws.