Can You Claim Moving Expenses for Going Back to School?
The Tax Cut and Jobs Act of 2017 changes deductions
Are you planning to move cross-country to go to school this year? Are you thinking that you might be able to claim a tax deduction for some of the expenses? It used to be that taxpayers could deduct moving expenses if they relocated for work reasons and if they met two requirements: the time test and the distance test. If you intended to work in addition to attending school somewhere far from home, you might have qualified.
But that changed when President Donald Trump signed the Tax Cuts and Jobs Act on December 22, 2017. The TCJA eliminates the above-the-line tax deduction for moving expenses for everyone except active duty military who must relocate due to military orders. All other taxpayers lose this deduction, starting with tax year 2018.
If you relocated in 2017, however, you can still claim those costs on your 2017 federal tax return if you qualify. These are the rules as they applied before the TCJA went into effect and how they might affect students who moved in 2017. To claim these costs, you will need to make changes to your filed return for tax year 2017, by using Form 1040X to file an amended tax return.
The Distance Test
The distance test requires that taxpayers move at least 50 miles farther away than the distance between their old home and their new place of employment. In other words, if you currently live 10 miles from your workplace, your move must place you 60 miles from your new workplace. And no, you can't just take a longer route to get to your new job to make it work. The Internal Revenue Service counts the distance as the shortest route between work and home that's available to you.
The Time Test
Under the time test, a taxpayer must work full-time for at least 39 weeks during the 12 months following the move. If you're married and file a joint return, either spouse can meet the work test and the expenses would still be deductible. The IRS allows 12 months from the time of your move to meet this test.
If you're self-employed, you have to work full-time at least 78 weeks in the 24 months after your move.
You would have to meet both these tests to qualify to claim this deduction for the 2017 tax year.
How These Rules Affect Students
Students can claim the moving expense deduction if they meet both the distance and time tests just as anyone else must do—in other words, as long as they work at their new location and they don't just attend school. There's no rule that says you can't also attend school in addition to working full-time. You must simply work the requisite number of full-time hours.
For example, a part-time grad student might have a full-time day job or he might work full-time as an independent contractor while in school. That would qualify him for the deduction. But if you work just part-time, you'll lose the deduction. Part-time employment will not qualify you according to the terms of the time test.
Additional Tax Break Options
Students still have some options available to them. You might consider making use of other tax breaks designed specifically for students that are not impacted by the Tax Cuts and Jobs Act, such as the Lifetime Learning Credit or the American Opportunity Tax Credit. Estimate your tax obligation in conjunction with either of these credits. You might realize that you're actually better off claiming one of them than you would be if you had been able to claim the moving deduction.
And remember that the pivotal date is your move. For example, if you relocated between semesters in December 2017 and if you were able to arrange your schedule to work full-time for 39 weeks in 2018, you would still qualify for the moving expense deduction for the 2017 tax year because the IRS gave you 12 months from the time of your move to meet the time test.
For students whose class schedule didn't allow for full-time work, one solution was to start their own consulting or freelance business so that they could have the flexibility to work around their school hours.
Note: Tax laws change periodically and the above information may not reflect the most recent changes. Please consult with a tax professional for the most up-to-date advice. The information contained in this article is not intended as tax advice and it is not a substitute for tax advice.