The Moving Expenses Tax Deduction
Are moving expenses tax deductible?
It used to be that you could deduct some of your costs of moving if you relocated to start a new job or to seek work in another city, but the Tax Cuts and Jobs Act (TCJA) eliminated this deduction, at least for most taxpayers.
If there's any silver lining here, it's that many of the provisions of the TCJA are not permanent. The moving expense deduction disappears from tax year 2018 through tax year 2025, but it's scheduled to come back at that time unless Congress intervenes to eliminate it permanently or to totally renew the TCJA in its entirety.
This time frame means that if you moved in 2017 and you qualify, you might still be able to claim the expenses if you amend your tax return for that year or a previous year. And, of course, you might be able to claim it if you move in 2026, if Congress allows the TCJA to sunset and expire.
Military Members Can Still Claim the Deduction
The TCJA spares members of the Armed Forces. You can still claim the moving expense deduction for years 2018 through 2025 if you're on active duty and you're subject to a permanent change of station.
This can include a move from your home to your first post, from one post to another, or from your final post to your home or to "a nearer point in the United States," according to IRS Publication 521.
You can't claim expenses that are reimbursed by the government, and you only have a year to claim the deduction if you're moving due to ending your duty. But you can claim moving expenses for your spouse and dependents, even if they must relocate without you because you die, are imprisoned, or desert your post.
Deductible moving expenses include moving the contents of your home, as well as lodging en route—but not meals. And, of course, your expenses must be "reasonable."
This means that the extra miles and costs aren't tax deductible if you can get to your new destination via a direct route but you instead elect to drive a longer, scenic route. Side trips for sightseeing or any other personal matter aren't deductible just because you also happen to be moving at the time.
The Rules for Everyone Else
Qualifying moving expenses prior to 2018 include costs for packing, shipping, or storing your household goods and personal property, and costs for travel and lodging. As with the military provisions, meals aren't deductible as a moving expense.
Moving expenses were deducted "above the line" in the adjustments to income section on the first page of the Form 1040 for tax years up through 2017. This means that you don't have to itemize in order to claim it. You can take this deduction in addition to claiming the standard deduction or itemizing your deductions.
Three tests determine who can claim the moving expenses deduction, and you must meet all of them.
The "Closely Related to Starting Work" Test
You must relocate within one year of the time you first report to work at your new job location. Let's say that Sally moves from Seattle to Austin on July 1. She starts working at her new job in Austin on November 1. She started working within one year of the time she moved so she meets the "closely related to starting work" test.
This example also works if we reverse the time frame. Suppose that Sally begins working in Austin on April 1. She later moves all her furniture and belongings from Seattle to Austin on July 1. She still meets the "closely related to starting work" test because she moved within one year from the date she started working at her new location.
There's one exception to this rule. People who work outside the U.S. then retire and relocate back to the United States can deduct their moving expenses even though they're not starting work at a new location.
The Distance Test
Your new job location must be at least 50 miles farther from your former home than your old main job location was.
First, measure the distance from your previous residence to your new workplace. Let's call this measurement A. Now measure the distance from your previous residence to your old workplace. We'll call this measurement B. If A is at least 50 miles longer than B, the move satisfies the distance test.
Let's use Sally as an example again. She used to live and work in Seattle. Her commute from her home to her Seattle job was 10 miles when she lived there before relocating to Austin. The distance from her previous home in Seattle to her new job location in Austin is about 2,100 miles.
Because 2,100 miles is at least 50 miles farther than her old 10-mile commute, Sally's move meets the distance test.
The distance test doesn't apply to members of the military.
The Other Time Test
You must work at your new location long enough to satisfy a third test. You can satisfy this time test in one of two ways:
- You work full-time as an employee for at least 39 weeks during the 12 months following your move, or
- You work full-time as a self-employed person for at least 39 weeks during the first 12 months following your move and at least 78 weeks during the 24-month period following the move.
There are a few exceptions to this rule.
- People who work abroad then retire and relocate back to the U.S. are exempt.
- Surviving spouses of persons who worked abroad and relocated back to the U.S. after their spouse's death are exempt.
- People whose job at a new location ends because they became disabled or died are exempt.
- People who are transferred to another location for their employer's benefit, and people who were laid off for any reason other than willful misconduct, don't have to meet this test.
Where to Claim the Deduction
Moving expenses are calculated and recorded on Form 3903, then entered on line 26 of the 2017 Form 1040.
Military members must also complete Form 3903 and submit it with their tax returns for years 2018 through 2025. The deduction is moved to line 26 of the 2018 Schedule 1, a new form for that tax year. The total from Schedule 1 is then entered on line 6 of the 2018 Form 1040.
Updated by Beverly Bird