Can I Deduct Moving Expenses on My Taxes?
Learn about the criteria and process for deducting moving expenses on your taxes, including eligible costs and necessary documentation.
Taxpayers often look for ways to reduce their tax liabilities, and understanding the deductibility of moving expenses can be a valuable part of this process. The Tax Cuts and Jobs Act (TCJA) significantly altered these deductions, so it’s important to be aware of the current rules and regulations.
Eligibility Criteria
The TCJA of 2017 restricted the eligibility for deducting moving expenses. Today, only active-duty members of the Armed Forces can claim these deductions, and only when the move is made due to a military order. This includes moves from home to the first post of duty, between permanent posts, or from the last post of duty to a home or closer point in the U.S.
Eligible expenses must be reasonable and necessary, such as transporting household goods and travel costs for the taxpayer and their family. Meals during the move are not deductible. Any government reimbursement must be deducted from the total moving expenses before claiming the deduction.
Deductible Transportation and Storage
Eligible military members can deduct transportation and storage expenses for moving household goods and personal effects, including packing, crating, and shipping costs. These expenses must be reasonable to avoid scrutiny by the IRS.
Storage expenses are deductible if they are directly related to the move. This includes temporary storage for up to 30 consecutive days after leaving the former home and before delivery to the new residence. Detailed records and receipts are necessary to support these deductions.
Lodging Expenses
Lodging expenses incurred during the move are deductible for eligible taxpayers, covering temporary accommodations while traveling from the old residence to the new location. Lodging costs after arrival at the new destination are not deductible.
The IRS allows deductions for lodging on a per-night basis, such as hotel stays during the journey. Taxpayers must differentiate between deductible lodging expenses and non-deductible costs like meals. Reimbursed lodging expenses must also be subtracted from the total deductible amount. Maintaining accurate lodging receipts is essential.
Reporting Expenses
Eligible taxpayers, primarily active-duty military personnel, must use IRS Form 3903, “Moving Expenses,” to report these deductions. This form requires details about the move, such as the date, distance, and expenses incurred. Properly completing this form ensures the deductible amount is correctly transferred to the taxpayer’s primary tax return, usually Form 1040.
All deductible expenses must be substantiated with adequate documentation, which should be retained for at least three years from the filing date. This includes receipts, contracts, and correspondence related to the move to support the deduction and safeguard against audits.
Documentation and Recordkeeping
Maintaining proper documentation is critical for claiming moving expenses. Active-duty military personnel must keep comprehensive records, including receipts for transportation, storage, and lodging, as well as contracts or agreements related to the move.
Taxpayers should also log details of the move, such as mileage if a personal vehicle was used, travel dates, and military orders confirming the relocation. For instance, a military member moving from Fort Bragg to Fort Hood should retain their orders as proof of the mandated relocation. These records are essential for supporting deductions and protecting against penalties during audits.
The IRS requires taxpayers to preserve these records for at least three years from the filing date. If income is underreported by more than 25%, the statute of limitations extends to six years, and in cases of fraud, there is no limitation. Using digital tools to scan and store documents securely can ensure accessibility when needed.