Moving to a new area brings a lot of excitement and stress, but one thing is certain — you will have a huge bill when it’s all said and done. Moving expenses can add up quickly and cost thousands of dollars by the time you have successfully relocated. While moving expenses sting your wallet in the short term, qualifying moving expenses can offer some tax relief.
Understanding Deductible Moving Expenses
Deductible moving expenses reduce your taxable income, which translates into a lower tax bill. They offer some financial relief as you relocate and settle into your new home, but not all moving expenses qualify. It’s important to know the requirements and which moving expenses are tax deductible before you plan for a tax break next year.
Who Qualifies for Moving Expense Tax Deductions?
Tax deductions on moving expenses are not for everyone. You need to be in one of these groups to qualify for moving expense tax deductions.
Active Duty Military
Active-duty military members can qualify for tax deductions if they incur moving costs due to a military order and permanent change of station. This qualification won’t help if you want to relocate to another area for personal reasons. You can deduct the costs from shipping costs, storing goods, traveling expenses and other costs. However, meals are not deductible. If a military member dies, gets imprisoned or deserts, the spouse qualifies for moving expense tax deductions.
Distance Test
The distance test applies to military members who move for work-related reasons. To qualify for this parameter, you must first calculate the distance from home to work. Then, you must find a new home that is 50 miles away from your current employer, plus the existing gap. For instance, if you live 30 miles away from work, you have to relocate to a home that is 80 miles away from your current station to qualify.
Time Test
Individuals seeking a tax deduction from their moving expenses must also fulfill the time test. You have to work full-time at your new job for at least 39 weeks within the first year after you move. If you do not get full-time employment soon enough, you may not qualify for a moving expenses tax deduction.
Which Moving Expenses Are Deductible?
You might get deductions for your moving costs, but not all expenses are deductible. These moving costs qualify for tax deductions that can lower your bill.
Temporary Storage
If you have to use temporary storage for your goods while waiting to move into your new residence, you may qualify for a tax deduction. Only businesses can use temporary storage as a tax deduction, and if you store personal and business resources in the same storage unit, you can only get a tax break on the space occupied by the business resources. For instance, if you pay $200 for a storage unit and have 80% of the space allocated for business goods, you can only write off $160. You need to hold onto documentation that confirms you purchased storage space when relocating.
Packing and Crating of Personal Items
Packing and crating expenses can get deducted from your taxes as long as your employer does not reimburse you. The costs for professional packagers and packing supplies count as some of the qualifying expenses. You should keep the receipts and bring them to your accountant when preparing your tax forms.
Traveling Expenses (Including Lodging) to Your New Home
Keep a good record of all of your traveling expenses associated with the move. Gas, airfare, lodging and other expenses can turn into tax deductions. As with other potential deductions, you should hold onto documents that verify your expenses so you can potentially use them as tax deductions. You can only use necessary traveling expenses related to the move, and you still have to meet the distance and time test requirements.
Current Requirements for Deducting Moving Expenses?
Military members and their spouses who qualify for the distance and time test can qualify for deducting moving expenses. The Tax Cuts and Jobs Act of 2017 made it more difficult for non-military members to get a tax deduction from their moving expenses.
Save on Your Next Move
Most people will not qualify for a moving expenses tax deduction, but you can still save on your next move. Comparing the prices of goods and services can reduce how much you pay. Even if you don’t qualify for a tax deduction, it is still a good idea to stay on top of your moving expenses to minimize the likelihood of wasted funds.
Frequently Asked Questions
Is there a limit to the amount of moving expenses that can be deducted on taxes?
There is no limit to the amount of moving expenses that can be deducted on taxes as long as the expense qualifies.
About Marc Guberti
Marc Guberti is a personal finance writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.