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Filing your 2020 taxes and want to write off your move? Make sure you qualify.
As little as five years ago, you could deduct moving expenses from your taxes as long as you met a few requirements. But changes in the tax code took this ability away for most Americans. Learn what changed, how long the new tax regulation is here for, and who still qualifies to deduct their moving expenses.
Planning for an upcoming move? Check out this moving for work resource to see our top tips and find ways to save.
How the Tax Cuts and Jobs Act changed moving expense deductions
The Tax Cuts and Jobs Act of 2017 was designed to simplify individual income tax. It nearly doubled the standard deduction for most U.S. citizens, but eliminated some — including the one for moving expenses — in return.
The change went into effect December 31, 2017 and will last through December 31, 2025 unless Congress passes additional legislation. This means if you moved (or will move) for work during that time, you can’t claim those expenses. However, if you’re a member of the U.S. Armed Forces, your move may still qualify.
What about state taxes?
When tax reform happens, it’s up to each state to decide how to handle the changes. Of the 43 states with an income tax for individuals, almost half automatically adopt all federal tax changes. The other half chooses what makes sense for their residents and uses legislation to update policy. As of July 2019, these seven states still allowed moving tax deductions, though exceptions may apply:
- New Jersey
- New York
Consult your tax adviser to understand the current rules in your state.
Do I have to claim relocation bonuses from my employer?
Yes. Any compensation you received for your move, including bonuses and relocation packages must be claimed as income on your taxes.
Deductible expenses for active-duty military members
Though the Tax Cuts and Jobs act changed things for many people, active-duty military members who were ordered to move for a permanent change of station are still eligible to deduct moving expenses.
As long as you were not reimbursed for these items, you can deduct costs for:
The moving service
This includes the cost of packing and transporting your items to your new home as well as any fees paid to hire moving labor.
You can include the cost of storing your belongings if they’re stored after they leave your old home but before they arrive at the new home.
If you travel by car, you can either calculate the actual costs of gas and oil (keeping an accurate record for each expense), or you can use the 2020 standard mileage rate of 17 cents per mile. You can also deduct the price of airline or train tickets if you or a family member traveled that way. Lodging is also a deductible expense, but meals are not.
Keep in mind you can only claim expenses that are reasonable for the circumstances of your move. You should take the shortest, most direct route available to your new home. You cannot deduct expenses for taking the scenic route or a sightseeing detour. You also cannot deduct expenses for house hunting trips.
Use IRS form 3903 to calculate your total.
Filing back taxes?
If you’re in the process of filing back taxes for 2017 or before, you can still claim moving expenses for that time. To do so, you’ll need to know how things used to work.
Before the Tax Cuts and Jobs Act, the primary requirement for deducting moving expenses was that you moved for work — because your job changed, your business relocated, or you started a new job or business. If you can confirm that you moved for work during an eligible time, you’ll then need to meet three more conditions to qualify for moving expense deductions on your back taxes:
Closely related to the start of work
Generally speaking, you can deduct moving expenses acquired within one year of your job’s start date. Consult a professional tax advisor for information on exceptions to this rule.
The 50-mile distance test
To pass the distance test, your new job must have been located at least 50 miles farther from your former residence than your old job was. For example, if your previous job was 10 miles from your old house, the job you moved for would need to be at least 60 miles away to qualify for the deduction. If you didn’t have a previous workplace, you would use your old address for this test.
The time test
To pass this test you must have worked full-time for at least 39 weeks (9 months) during the first 12 months after you arrived in your new location. If you were self-employed, you must have worked full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks (18 months) during the first 24 months after you arrived. These time requirements did not have to be worked consecutively, or even for the same employer.
Married couples filing jointly only need to have one spouse who passed the time and distance tests to qualify for the moving expenses tax deduction.
Military members do not have to pass these tests.
Where to go with questions
For specific tax-related questions or information about how the Tax Cuts and Jobs Act applies to your situation, we recommend contacting a tax advisor or the IRS.
Anything else we can help you with? Leave a comment below!
Don’t forget! Your Federal Tax Return is due by April 15, and each state has different income tax due dates. If you’ve recently moved to another state, you’ll want to check when taxes are due to make sure you're getting everything completed in time.
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