Let’s go over what are qualified moving expenses. Moving can be an expensive process, and for those who qualify, certain moving expenses may be deductible or reimbursable. Understanding what qualifies as a moving expense is crucial, whether you are relocating for a new job, transferring within the military, or moving for other eligible reasons. While tax laws have changed in recent years, specific groups, such as active-duty military personnel, may still benefit from deductions on qualified moving costs. Additionally, some employers offer relocation packages that cover certain expenses associated with the move. Let’s go over what are qualified moving expenses.

Understanding Qualified Moving Expenses

Moving can be a costly and stressful process, and many individuals seek ways to minimize the financial burden. Qualified moving expenses are specific relocation costs that may be tax-deductible or reimbursable under certain conditions. While the Tax Cuts and Jobs Act of 2017 significantly changed the rules regarding the deductibility of moving expenses, understanding what constitutes a qualified moving expense is still essential for those eligible. For example, active-duty military personnel who move due to a permanent change of station (PCS) may still claim these deductions.

Eligibility for Moving Expense Deductions

Before 2018, many taxpayers could deduct moving expenses if their relocation met specific IRS guidelines. However, under current tax laws, only active-duty military members moving due to military orders qualify for these deductions. To be eligible, the move must be closely related to the start of work at a new location and meet both the distance and time tests. The distance test requires that the new job location be at least 50 miles farther from the taxpayer’s old home than their previous workplace was. The time test mandates that the taxpayer work full-time for at least 39 weeks within the first 12 months after the move.

Types of Qualified Moving Expenses – What Are Qualified Moving Expenses

For those eligible, certain moving expenses qualify for deductions or reimbursement. These typically include the cost of transporting household goods and personal effects, travel expenses associated with the move, and temporary storage costs. Transportation costs cover hiring professional movers, renting moving trucks, or shipping belongings. Travel expenses include mileage, fuel, lodging, and tolls but do not cover meals. Temporary storage costs for household items, typically for up to 30 days, may also be considered qualified moving expenses.

Non-Deductible Moving Expenses

With the tax law changes, many previously deductible expenses no longer qualify unless they fall under military exceptions. Non-deductible moving costs now include home sale expenses, lease break penalties, house-hunting trips, temporary housing, and meals during relocation. Additionally, costs associated with new furniture purchases, cleaning fees, and utility connections at the new residence do not qualify.

Employer Reimbursement for Moving Expenses

Some employers offer relocation assistance, covering some or all moving costs. While this was previously considered a non-taxable benefit, changes in tax laws mean that most employer reimbursements for moving expenses are now taxable income. The exception applies to active-duty military personnel moving due to orders. If an employer provides a relocation package, employees should carefully review the reimbursement structure and any tax implications.

Military Moving Expenses and Tax Deductions

Active-duty military members can still claim moving expense deductions when relocating under military orders. Qualified expenses include household goods transportation, travel expenses for the service member and their family, and storage fees. These deductions are claimed on IRS Form 3903 and can reduce taxable income, lowering overall tax liability. Military personnel should keep detailed records of all moving-related expenses and receipts to substantiate their claims.

State-Level Moving Expense Deductions

While federal tax deductions for moving expenses are restricted, some states still allow deductions for qualified moving costs. Taxpayers should check their state’s regulations to determine whether they can claim moving-related expenses on their state tax returns. Keeping detailed records and consulting a tax professional can help ensure compliance with state-specific tax laws.

Planning a Cost-Effective Move

For those ineligible for moving expense deductions, there are still ways to reduce relocation costs. Comparing moving company rates, choosing off-peak moving times, and minimizing the number of belongings transported can help lower expenses. Additionally, some employers may negotiate relocation benefits, and individuals may be able to take advantage of discounts offered by moving service providers.

Conclusion

Understanding qualified moving expenses is crucial for individuals navigating the financial aspects of relocation. While tax deductions for moving expenses have become more limited, active-duty military personnel still benefit from these provisions. For others, employer reimbursements, state tax deductions, and cost-effective moving strategies can help offset expenses. Keeping thorough records and consulting tax professionals ensures compliance with tax laws and maximizes potential financial benefits. Morse Van Lines is committed to assisting individuals and families with smooth, efficient moves while helping them understand and manage their relocation expenses effectively.