Are Moving Expenses Tax Deductible?
Are moving expenses tax deductible?
It used to be that your moving expenses were tax deductible if you relocated to a new city to start a new job or to seek work. The Tax Cuts and Jobs Act (TCJA) eliminated this deduction from the tax code for most taxpayers, but it's still available to members of the Armed Forces as a Schedule 1 deduction—"above the line." It helps determine adjusted gross income (AGI), and that's particularly beneficial.
This change went into effect in the 2019 tax year.
Those who don't serve in the military can still claim the deduction if they moved in 2016 or 2017 and they qualify. You can go back and amend your tax return for the year you moved. You have three years from the date you filed your original return to do amend it, or two years from the date you last paid taxes on that return, whichever is later.
Qualifying Rules for Military Members
You can claim the moving expense deduction for tax year 2018 and going forward 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 U.S.
You can't claim expenses that are reimbursed by the government, and you only have a year to claim them if you're moving due to ending your duty. Expenses associated with members of your household are covered, and your spouse and dependents can claim the moving expense deduction if they must relocate without you because you've died, are imprisoned, or you deserted your post.
Deductible moving expenses include the costs of moving the contents of your home, as well as lodging en route—but not meals. Your expenses must be "reasonable."
Most of the rules for qualifying for this deduction as a military member are the same as those that applied to other taxpayers before 2018.
Expenses That Don't Qualify
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 matters aren't deductible just because you also happen to be moving at the time.
A few other expenses fail to qualify as well:
- Costs associated with buying or selling a home, including the purchase price of a new home
- Security deposits and lease expenses
- Registering an automobile in a new state, and the cost of a new driver's license
- Expenses associated with returning to the former place of residence for any reason after the move
- Storage charges after arrival at the new place of residence, except for foreign moves
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 and side trips can't be included.
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 when you first report to work at your new job location. Let's say that you move from Seattle to Austin on July 1. You start working at your new job in Austin on Nov. 1. You started working within one year of the time you moved, so you meet the "closely related to starting work" test.
This example also works if the sequence of events is reversed. Suppose you begin working in Austin on April 1. You later move all your furniture and belongings from Seattle to Austin on July 1. You still meet the "closely related to starting work" test because you moved within one year from the date you started working at your new location.
There's one exception to this rule. People who work outside the U.S. and who 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.
Military members must move within one year of ending active duty or within the period of time allowed for under the Joint Travel Regulations if they're not moving to their first post or from one permanent post to another.
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. We'll call this measurement A. Now measure the distance from your previous residence to your old workplace. We'll call this measurement B. The move satisfies the distance test if measurement A is at least 50 miles more than measurement B.
Maybe you used to live and work in Seattle, and your commute from your home to your Seattle job was 10 miles before you relocated to Austin. The distance from your previous home in Seattle to your new job location in Austin is about 2,100 miles. Because 2,100 miles is at least 50 miles farther than your old 10-mile commute, your move meets the distance test.
The distance test doesn't apply to members of the military who can still claim this deduction.
Another Time Test
You must work at your new location long enough to satisfy a third test. You can do this 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 also exempt.
- People whose job at a new location ends because they became disabled 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.
How to Claim the Deduction
Moving expenses were deducted "above the line" in tax years up through 2017 as well. They were entered in the adjustments to income section on the first page of Form 1040. You don't have to itemize in order to claim the deduction if you go back and amend an old return. You can take it in addition to claiming the standard deduction or itemizing your deductions.
Moving expenses are calculated and recorded on Form 3903, then entered on line 26 of the 2017 Form 1040 if you're going back to amend that year's return.
The Form 1040 tax return has been revised twice since the 2017 tax year, so military members will claim the deduction differently in 2018 and going forward.
Military members must also complete Form 3903 and submit it with their tax returns for tax years 2018 and 2019. The deduction is moved to line 26 of the 2018 Schedule 1, a form that was first introduced in 2018. Line 36 of Schedule 1 is subtracted from line 6 of the 2018 Form 1040 to arrive at your adjusted gross income (AGI).
The process for claiming the deduction is much the same in 2019, but the lines are different because the tax forms were changed again. You'll find the deduction on line 13 of the 2019 Schedule 1. Line 22 of Schedule 1 is then entered at line 8a of the 2019 Form 1040 and subtracted from line 7b to arrive at your AGI.
The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.
IRS. "Topic No. 455 Moving Expenses for Members of the Armed Forces." Accessed March 2, 2020.
IRS. "Military Moving Expenses," Page 7. Accessed March 2, 2020.
IRS. "Publication 521 (2018), Moving Expenses." Accessed Feb. 7, 2020.
Military One Source. "PCS and Taxes: Deducting Military Moving Expenses." Accessed March 2, 2020.
IRS. "Publication 521 Moving Expenses for Use in Preparing 2017 Returns," Pages 2-6." Accessed March 2, 2020.
IRS. "1040 Instructions Tax Year 2018," Page 90. Accessed March 2, 2020.
IRS. "Tax Year 2019 1040 and 1040-SR Instructions," Page 85. Accessed March 2, 2020.