Relocating to a different region can affect you in so many ways, but mostly your mind and wallet. If you’re a first-time homebuyer, it could cost you thousands of dollars. However, some states will help to alleviate this burden by allowing a deduction for any moving expenses on your income tax returns.
Employees of different companies who move to a new job in another state can deduct any moving expenses they incur on the way. Unfortunately, this does not work with the IRS unless the company reimburses the federal tax body. So it doesn’t allow for a tax deduction for moving expenses. However, a few states recognize an “exclusion” for job-related moving costs that are not reimbursed.
What is Moving Expense Deduction?
A moving expense deduction is when people move to a different state for work and are allowed to deduct or exclude some reasonable moving expenses. Transportation, lodging, packing, and storing belongings are all included.
The move must, however, be job-related. The meaning of this clause is that the move must meet the IRS definition of “a new principal place of work,” as well as all other requirements for moving expenses.
How Does the Moving Expense Deduction Work?
Moving expenses are generally only deductible if you’re relocating for work. Moving expenses can be deducted from your taxes if you’re in the military and moving due to a permanent change of location.
This rule does have a few exceptions. You may be able to deduct moving expenses if you’re self-employed, even if it’s not for a new job. Moving expenses can also be deducted if you’re moving due to circumstances beyond your control.
For example, if you’re forced to relocate due to illness or a natural disaster, or because of a construction project that prevents you from accessing your home, you may still be eligible for tax benefits.
States That Allow Moving Expense Deduction
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
To qualify for the moving expense deduction, you must meet these 5 requirements:
- You must have a new principal workplace that is at least 50 miles away from your previous principal workplace.
- During the first 12 months following your arrival in the general area of your new job, you must work full time in the general area of your new job for at least 39 weeks. During the first 24 months after arriving in the general area of their new workplace, self-employed individuals must meet this requirement for at least 78 weeks.
- You must have moved within one year of starting a qualifying job to be eligible for the moving expense deduction.
- Additionally, the distance between your old home and your new job location should be less than the distance between your old home and your old job location (or, if you didn’t have a job before the move, the distance between your old home and the place where you looked for a job).
- You pass the time test if you work full time for at least 39 weeks in the first 12 months after arriving in the general area of your new job location.
How To Claim The Moving Expense Deduction
If you meet these requirements, you can deduct the following expenses: expenses associated with moving to a new home (including lodging but not meals). The deductible is 24 cents per mile if you’re driving your car.
The cost of renting a truck or taking public transportation is deductible. Personal vehicles and truck rentals can also be deducted for parking and tolls.
Moving household goods and personal property (including packing materials), such as furniture, books, kitchen items, and clothing, using a professional moving company or a rented truck or trailer.
If you are eligible to take the deduction, there are a few ways you can claim it on your tax return. You can either claim it as an adjustment to income or as a miscellaneous itemized deduction.
The adjustment to income method is the simplest way to take the deduction. You can claim it on Form 1040, line 26. The miscellaneous itemized deduction method requires you to complete Schedule A and attach it to your tax return. You will claim itemized deductions on line 20 of Schedule A. You will then enter your moving expense deduction on line 24.
How to Make the Most of The Moving Expense Deduction
Once you have discovered which states allow moving expense deduction, there are a few things you can do to make the most of it.
- Keep track of your expenses. This includes the cost of moving your belongings, traveling to your new job, and any other related expenses. Be sure to keep receipts and documentation so that you can easily claim the deduction when you file your taxes.
- Talk to your employer about reimbursing you for some of your moving expenses. Many employers will reimburse their employees for moving expenses. This can help reduce the amount of money you have to pay out of pocket.
- Claim the deduction as soon as possible. The sooner you claim the deduction, the more money you will save. Be sure to file your taxes as soon as possible so that you can get the most out of your deduction.
Conclusion
For anyone planning to move to another state, it’s good to know which states allow moving expense deduction and any moving expenses tax deduction. Rules for moving expenses are pretty straightforward, but most states don’t allow these deductions and are in line with the federal suspension of the moving expenses deduction.
The deduction, on the other hand, is intended to assist employees who have been placed in undue hardship as a result of having to relocate because their job location has changed. It was designed to save money for the federal government. Because the government doesn’t want you to transfer from a job in Kansas City to a job in St. Louis. The deduction, on the other hand, does not apply if you moved within 50 miles of your previous residence.