Are you planning a significant move and concerned about the accompanying costs? Perhaps you’re wondering, ‘Are there any tax benefits to alleviate this heavy financial load?’ If so, you’re not alone. The financial implications of moving can often seem like a daunting hill to climb.
Previously, tax deductions for moving expenses were a notable relief for many taxpayers, covering approved costs such as transporting personal belongings and travel to the new home, apart from meals. However, this landscape changed significantly when the Tax Cuts and Jobs Act of 2017 came into effect, stripping away these deductions for most taxpayers from 2018 to 2025, with an exception carved out for certain Armed Forces personnel and their families.
Tax deductions for moving expenses
For many years, moving expenses were tax-deductible for a broad range of taxpayers. However, under the terms of this Act, most taxpayers lost the ability to claim these expenses, a change that extends from tax years 2018 through 2025.
Yet, there are certain circumstances and exceptions to this rule. If you find yourself in the position of needing to amend a tax return filed prior to the enactment of this reform, the old rules may still apply. Also, an important carve-out exists for active military personnel and their dependents, under specific conditions.
As per the current stipulations, if you serve in the military and meet the following criteria, you could be eligible for a moving expense tax deduction:
- You are an active-duty military member and are required to permanently relocate to a new base following a military order.
- You are a dependent or spouse of a military member and are moving to a new base.
- You are the spouse or dependent of a military member who has tragically died, been imprisoned, or deserted.
Being conversant with these recent tax deduction rules is crucial, especially if you fall into the highlighted categories. Understanding your eligibility can help you navigate the tax season more effectively, ensuring you take full advantage of any applicable deductions.
What are moving expenses?
Moving to a new home, especially under official military orders, involves a host of expenses. Recognizing this, the IRS provides certain tax deductions specifically for such circumstances. However, it’s important to understand which moving expenses are considered deductible and which ones are not, to fully benefit from this provision.
When you or your spouse is an active-duty military member who must relocate under a military order, certain reasonable and necessary costs associated with your move can be deducted.
Such allowable expenses primarily encompass the actual costs associated with the transportation of your personal goods and effects, and they can include:
- Temporary storage charges
- Packing supplies and services
- Gas or mileage on your personal vehicle*
- Rental trucks for transporting belongings
- Insurance for the move
- Traveling costs to your new home, including lodging expenses. However, it’s important to remember that meal expenses are not deductible.
*The IRS allots a standard mileage rate (18 cents per mile for the first half of 2022 and 22 cents per mile for the second half of 2022) that you can use to calculate your travel expenses. But if you prefer, you can keep up with your actual transportation costs and deduct those instead.
However, not all costs are covered. For example
- meal expenses during the move
- costs reimbursed by the government
- costs paid directly by the government that are excluded from your income cannot be deducted.
To calculate these costs, you can use a standard mileage rate provided by the IRS, which is set at 18 cents per mile for the first half of 2022, and 22 cents per mile for the second half of 2022. Alternatively, you may choose to keep a record of your actual transportation costs and deduct those instead. These eligible travel expenses include gas, oil, parking fees, and tolls.
Military Moving Expenses
Members of the armed forces on active duty who face a long distance moving due to a permanent change of station can find some relief in the form of tax deductions for their moving expenses. Unlike civilians, military personnel are exempt from the standard time and distance tests required to claim moving expense deductions. They can report these unreimbursed expenses on IRS Form 3903: Moving Expenses.
A “permanent change of station” is a broad term that encompasses several scenarios:
- Moving from your home to your first post of active duty.
- Transitioning from one permanent post of duty to another.
- Relocating from your last post of duty to your home or a closer location within the United States. The move must take place within a year of ending your active duty or within the period allowed under the Joint Federal Travel Regulations.
Special considerations also apply to spouses and dependents of armed forces members who desert, are incarcerated, or unfortunately pass away. For these individuals, a permanent change of station can mean moving:
- To the member’s initial place of enlistment or induction.
- To your or the member’s documented home of record.
- To a nearer location within the United States.
Even when the military moves you to a different location than the member, both relocations are treated as a single move to your new main job location.
For those facing a foreign move—which is defined as moving from the United States or its possessions to a foreign country or between foreign countries—the scope of deductible moving expenses extends.
In such scenarios, you can include the costs associated with moving your household goods and personal effects to and from storage, as well as storing these items while the new location remains your main job location.
ust as with domestic moves, if the military relocates you to a different location than the military member, both moves are treated as a single move to your new main job location.
In conclusion, the Tax Cuts and Jobs Act of 2017 has significantly changed tax deductions associated with moving expenses, with the majority of taxpayers no longer able to claim these deductions from 2018 to 2025.
However, exceptions exist for active-duty military personnel and their dependents under specific conditions.
Understanding these deductions, including what constitutes a permanent change of station and which expenses are deductible, is crucial for tax preparation.