One of the benefits that homeowners and employees once enjoyed when they moved in or out or moved from place to place is now gone! That’s right. The Tax Cuts and Jobs Act enacted in 2017 has changed the rules for moving expense tax deduction, which means these expenses can no longer be claimed on your federal return. This rule is set to be valid from the year 2018 until 2025.
The moving expense tax deduction overhaul is sure to become expensive for you unless you are in the military or moved before the tax year 2018. However, you may still claim a moving tax deduction on your state return, depending on whether or not your state allows this provision.
What Constitute Moving expenses?
Expenses related to your relocation that counts as both necessary and reasonable are the official definition of moving expenses. These include, but not limited to, the gas cost for your vehicle, cost of hiring rental trucks and movers, cost of packing, short-term storage, and insurance on the vehicle and your belongings. If you are moving long-distance, you may include the cost of staying at a hotel on your way to your destination. However, meals and entertainment expenses are not regarded as moving expenses, and hence cannot be deducted. Parking fees and tolls, on the other hand, can be added to your deductible list.
Now the question is, can you still deduct moving expenses on your federal tax return? Yes, but only if you are an active-duty member of the United States military. You are also eligible for this deduction if your relocation took place before December 2017. The TCJA tax overhaul information on the IRS website clearly explains the details of who is eligible and who is not. So, those who are active in the military, civilians who haven’t yet filed their 2017 tax return, or are directed by the government to refile any of their taxes before 2018 can take those deductions right away.
The IRS website says you can amend a tax return for three years after the filing or two years after paying the tax, whichever is later. This means in 2021, you will have little to zero chance of recouping the deduction for all the expenses incurred during your move before 2018. For those who qualify for moving expense tax deduction, here are a few key things to remember. Deductible can be made only for those costs directly related to the relocation or travel. For example, shipping, lodging, rentals, packing, supplies, labor, parking, and toll cost are all deductible expenses. The cloth items that you purchased on the day of the relocation, the meals you ate in that fancy restaurant on the way, your time and money spent at the theme park, casino, or boardwalk with your family are all ineligible for the deduction. Those moving expenses reimbursed by your employer are also ineligible for the deduction.
In 2021, almost every taxpayer, except those on military duty, is now ineligible for moving expense deduction. However, if you still want to learn more about the rules you once had the opportunity to receive benefits from, here is some information. For civilians, there were also time and distance criteria for taking deductions. Your new job, destination, or workplace needed to be 50 miles away from your old home or place. You were required to start your new job within a year after the relocation. You were also required to work at the job for at least 30 weeks in the following year. The only exception to these criteria was if you were moving to retire, or you couldn’t work due to health, disability, layoff, death, or a no-fault reason.
Active military members are exempted from all of the above criteria. The relocation cost of active military service members due to change of station or retirement qualifies for moving expense deduction on their tax returns.
Moving can be expensive. Although there is no way you can deduct the cost related to moving on your federal return now, you can still claim it from your state return if such a provision exists.