Are Moving Expenses Tax Deductible?
Understand current tax rules for moving expenses. Learn if your relocation qualifies for the specific, limited deduction.
Moving can be a significant undertaking, both personally and financially. Historically, certain moving expenses were deductible on federal income tax returns, offering some financial relief during a relocation. However, the rules surrounding this deduction have undergone considerable changes in recent years, impacting most taxpayers.
Current Rules for Moving Expense Deductions
The landscape of tax deductions for moving expenses shifted significantly with the Tax Cuts and Jobs Act (TCJA) of 2017. This legislation suspended the deduction for most taxpayers for tax years 2018 through 2025. This means that, for the majority of individuals, the costs associated with moving, even for a new job, are generally no longer deductible on federal tax returns.
Despite this suspension, an exception remains. Active-duty members of the U.S. Armed Forces may still be eligible to deduct certain unreimbursed moving expenses. This exception applies if their move is due to a military order and involves a permanent change of station (PCS).
Eligibility for Qualified Military Members
Active-duty members of the U.S. Armed Forces must meet specific criteria to qualify for the moving expense deduction. The move must be due to a military order and constitute a permanent change of station (PCS). A PCS encompasses several scenarios, including a move from a service member’s home to their first post of active duty, a move from one permanent post of duty to another, or a move from a last post of duty to their home or a nearer point in the United States.
A permanent change of station also includes moves for a service member’s spouse or dependents. For military members, the typical distance and time tests that applied to other taxpayers before 2018 are waived when moving due to a PCS.
What Moving Expenses Qualify
For eligible military members, specific types of unreimbursed moving expenses can be deducted. These deductible expenses generally include the costs associated with transporting household goods and personal effects. This can involve expenses for packing, crating, hauling a trailer, and in-transit storage. The deduction also covers the cost of shipping vehicles and transporting household pets.
Travel expenses from the old home to the new home are also deductible. This includes the cost of lodging for the service member and their family while en route, but notably excludes meals. Taxpayers can choose to deduct either the actual cost of transportation, such as gas and oil, or use a standard mileage rate for their vehicle. For 2024, the standard mileage rate for moving is 21 cents per mile.
Claiming the Deduction and Record Keeping
To claim the moving expense deduction, eligible military members utilize Form 3903, Moving Expenses. This form is used to calculate the deductible amount, which is then reported as an adjustment to income on Schedule 1 (Form 1040). If multiple qualifying moves occurred within a tax year, a separate Form 3903 should be completed for each move.
Thorough record keeping is important for substantiating any claimed deductions. Taxpayers should retain detailed records of all expenses incurred, such as receipts for moving services, transportation costs, and lodging. While the IRS generally recommends keeping tax records for at least three years from the date the original return was filed, it is prudent to retain records supporting deductions for as long as they might be needed for an IRS inquiry or audit.