Moving Expense Tax Deduction: Out with the Old, In with the New

computing taxMoving is not only stressful and time-consuming — it can be costly, too.

Moving Squad, a reputable full- service moving company in South Florida, understands the difficulties of moving. It advises people planning a move to consider their needs, such as storage and professional packing, for a more efficient and stress-free process.

Here’s another tip: whether it’s an interstate or out-of-state relocation, set aside funds and budget carefully.

Deducting Moving Expenses when Filing Taxes

Savvy movers deduct some of the moving expenses for a new job or job opportunity when they file for taxes. These deductibles include the costs of moving personal effects and household goods and travel costs, including lodging.

Under the Internal Revenue Service’s Publication 521, you could qualify for moving expense deductions if you meet the following criteria:

  • The move is closely related to the start of work
  • The new work location meets distance requirements from your former home
  • You fulfilled the minimum amount of time (39 to 78 weeks, depending on the type of employment) in the first year or two after the relocation

The tax reform passed in December 2017, however, changed all that.

The Tax Cuts and Jobs Act of 2017

Starting from the tax year 2018 (or the taxes you file in 2019), all expenses incurred during your move — from the moving service to the boxes — are no longer tax deductible. Fortunately, many of the provisions in the tax reform law are not permanent.

The Tax Cuts and Jobs Act passed in December 2017 only suspends the moving expense deduction from the current tax year until the tax year 2025. The deductions will be back in effect in the tax year 2026, barring any intervention from the Congress to remove it permanently.

So, if you can, try to put off any plans for a major work relocation in the next eight years. It might be more economical in the long-run.

Employer-reimbursed Moving Expenses

The new tax law prevents taxpayers from including their moving expenses as a tax deductible. It doesn’t stop employers, however, from reimbursing their employees.

If your employer chooses to reimburse your move as a business expense, they’ll have to comply with some procedures. Specifically, they can only do so by treating the payment as W-2 wages. This will allow your employer to deduct the payment as a compensation expense. Reimbursements for other business expenses are still tax-free for you and other employees.

Exceptions to the Rule

Moving expenses and employer payments before the passing of the tax reform law are still excluded from federal income or employment taxes. So, if you moved in 2017 and received your employer’s reimbursement in 2018, the payment remains tax-free.

The Tax Cuts and Jobs Act only applies to civilians, moreover. Active duty members of the US military who will relocate can still deduct qualified moving expenses from their income tax filings if they don’t receive federal reimbursement for the move. They also don’t have to pay taxes on certain moving expense reimbursements provided that the move is a military-ordered permanent change of station.

Keeping updated on tax laws and requirements can help you save money. Use the information to plan your move accordingly. Talk with your employers about possible reimbursements to help make your moving expenses more manageable.