Navigating Moving Expense Deductions in 2023
Moving to a new home or relocating for a job can be exciting but costly. Fortunately, the tax code provides some relief in the form of moving expense deductions – but the rules have changed significantly in recent years.
Before 2018, many taxpayers could deduct moving-related costs from their taxable income. However, the Tax Cuts and Jobs Act (TCJA) passed in 2017 effectively eliminated this deduction for most Americans.
The good news is that certain taxpayers, particularly active-duty members of the U.S. Armed Forces, can still claim moving expense deductions in 2023. Let’s look closer at the current state of moving expense deductions and explore who qualifies, what expenses are eligible, and how to claim them on your tax return correctly.
The Changing Landscape of Moving Expense Deductions
Before the TCJA, taxpayers could deduct qualified moving expenses as an “above-the-line” deduction, meaning these costs directly reduced their taxable income regardless of whether they itemized deductions or claimed the standard deduction. To qualify, you had to meet the following criteria:
– Your new job location had to be 50 miles farther from your old home than your previous one.
– You had to work full-time for at least 39 weeks (78 weeks for self-employed individuals) during the first 12 (24) months after the move.
– Your employer did not reimburse you for the moving expenses using pre-tax funds.
The TCJA, however, suspended the moving expense deduction for most taxpayers from 2018 through 2025. This means that for most Americans, the considerable costs associated with relocating for a job can no longer be used to lower your taxable income.[1][2]
Who Can Still Deduct Moving Expenses in 2023?
While the TCJA eliminated the moving expense deduction for most, there is an important exception for active-duty members of the U.S. Armed Forces. If you are an active-duty military member and your move is due to a permanent change of station, you can still claim qualified moving expenses on your tax return.[3]
A permanent change of station includes:
– A move from your home to your first post of active duty
– A move from one permanent post of duty to another
– A move from your last post of duty to your home or a nearer point in the U.S.
The move must occur within one year of ending your active duty or within the period allowed under the Joint Travel Regulations. Additionally, suppose you are the spouse or dependent of a military member who deserts, is imprisoned, or dies. In that case, you may also qualify for the moving expense deduction for relocation to specific designated locations.[3]
It’s important to note that the distance and time tests previously applied to civilian moves do not apply to active-duty military personnel. If your move is due to a permanent change of station, you can claim your eligible expenses regardless of the distance or time you work at the new location.[4]
Eligible Moving Expenses for Military Personnel
If you are an active-duty member of the U.S. Armed Forces and your move qualifies for the deduction, you can claim the following expenses on your tax return:
– Transportation and storage of household goods and personal effects
– Travel and lodging expenses for you and members of your household
– Costs associated with connecting or disconnecting utilities
You can use IRS Form 3903 to calculate and claim your moving expense deduction. On this form, you’ll report your qualified expenses on lines 1 and 2 and any employer reimbursements on lines 4. The difference between your expenses and reimbursements is your allowable deduction, which you can then claim on your tax return.[3]
Keeping detailed records of all your moving-related expenses, including receipts, invoices, and mileage logs, is essential. This documentation can be invaluable if the IRS ever audits your return.
Ineligible Moving Expenses
While active-duty military personnel have more flexibility when it comes to claiming moving expenses, some costs still do not qualify for the deduction. These include:
– Expenses for house-hunting trips before the move
– The cost of meals during the move
– Expenses related to the sale or purchase of a home
– Temporary living expenses at the new location
Additionally, if your employer fully reimbursed you for moving expenses using pre-tax funds, you cannot claim those costs as a deduction. Any reimbursements you receive must be reported on your tax return, and the deduction is limited to the amount of unreimbursed expenses.[3]
Claiming the Moving Expense Deduction
To claim the moving expense deduction as an active-duty military member, you must complete IRS Form 3903 and attach it to your federal tax return. You’ll report your qualified expenses, any reimbursements received, and the resulting deduction amount on this form.
Be sure to carefully review the instructions for Form 3903, as some specific rules and requirements must be met. For example, you’ll need to certify that you meet the criteria for the deduction by checking the appropriate box on the form.[3]
If you’re unsure about your eligibility or have questions about which expenses are deductible, consulting with a tax professional is always a good idea. They can help ensure you claim the maximum allowable deduction and stay compliant with IRS regulations.
Looking Ahead: The Future of Moving Expense Deductions
As mentioned earlier, the TCJA’s suspension of the moving expense deduction for most taxpayers expires at the end of 2025. Unless Congress takes action to extend or modify the law, the deduction may be reinstated for non-military moves starting in 2026.
However, the future of this deduction remains uncertain. Lawmakers could make the TCJA’s changes permanent or revise the rules to be more restrictive or more generous. Taxpayers must stay informed about any developments in this area as the 2025 expiration date approaches.
For now, the only individuals who can reliably claim moving expense deductions are active-duty members of the U.S. Armed Forces who are relocating due to a permanent change of station. If you fall into this category, take advantage of this valuable tax break to offset some of the costs associated with your move.
Conclusion
The Tax Cuts and Jobs Act of 2017 significantly curtailed the availability of moving expense deductions for most taxpayers. However, active-duty military personnel relocating due to a permanent change of station can still claim qualified moving costs on their tax returns.
By understanding the eligibility requirements, eligible expenses, and proper reporting procedures, you can maximize your tax savings and make the most of this deduction. As the 2025 expiration date for the TCJA’s changes approaches, staying informed about any potential updates to the moving expense deduction rules will be essential.
Navigating the complexities of tax deductions can be challenging. Still, with the correct information and guidance, you can confidently claim the moving expense deduction and offset some of the financial burdens of your relocation. Whether you’re an active-duty service member or simply curious about the future of this deduction, staying informed is critical to making the most of your tax filing opportunities.
Reader further:
Citations:
[1] https://sharedeconomycpa.com/blog/deduct-moving-expenses/
[2] https://www.taxesforexpats.com/articles/financial-planning/moving-expenses-tax-deduction.html
[3] https://www.irs.gov/pub/irs-pdf/i3903.pdf
[4] https://qshark-moving.com/are-moving-expenses-tax-deductible/
[5] https://turbotax.intuit.com/tax-tips/jobs-and-career/guide-to-irs-form-3903-moving-expenses/L6CwmGm3K
