Between movers, packing supplies, gas for your car, and everything else you’ll need during the relocation, moving costs add up fast. A relocation can set you back anywhere between a couple of hundred dollars and more than $10,000. So saving up in advance and padding your budget with anything you can is a good idea. But what about after the move? Is there a way to get some of the money back? Can you deduct what you spend on Gibraltar Van Lines moving services and other moving needs? And let’s face it: we’re all a bit confused when doing our taxes. So how do you deduct moving expenses when that is an option?
First things first: is it possible to deduct moving expenses?
As always, the answer to whether you can deduct something on your taxes is that it depends. Unfortunately, between the tax years of 2019 and 2025, moving expenses specifically are not deductible for most Americans due to the Tax Cuts and Jobs Act (TCJA) of 2017. But before you go and decide that reading about deducting moving expenses is pointless and that your moving costs NJ are just something you’ll have to live with, you should also know that there are exceptions to this rule.
Prior to TCJA coming into effect, you could list moving expenses on your tax return provided your relocation was related to employment. Odds are this will be possible again after 2025 so you should at least be prepared, right? Additionally, the TCJA only regulates federal tax returns. State laws may differ so you should do some research into local regulations as well. Finally, moving expenses are still deductible for active members of the armed forces and their dependents when related to a permanent change of station.
When are moving expenses deductible?
If the option to deduct moving costs on your tax return exists, you still have to meet three criteria: the purpose, the time, and the distance of the move. Here’s how it works:
- the purpose of the move: your move has to be related to starting a new job in order for the costs to be deductible; even if you aren’t moving specifically for work, starting a new job within a year of relocation qualifies you for a tax deduction on the moving expenses
- the time factor: since the relocation must relate to your work, you need to have worked full-time for at least 39 weeks in the year following your relocation in order for your moving expenses to be deductible
- the distance aspect: you can only deduct moving costs if your new place of work is at least 50 miles farther away from your old home than your current place of work
How does one deduct moving expenses?
Let’s be honest for a second: we are all confused when it comes to doing taxes. There are so many forms to fill out! Many of them have very confusing instructions. And if you’re still new to doing taxes, you won’t be used to the forms yet. Luckily, deducting moving costs doesn’t actually require much.
Make sure you fit the criteria
There’s no point in wasting time on adding up the costs of movers Livingston NJ, packing supplies, gas, lodging, and everything else you spent on your relocation, then filling out tax forms if you cannot deduct the expenses. So the first step is always to make sure your moving expenses are deductible. Remember that only active-duty military can list moving expenses on federal tax returns right now. If you’re reading this at a time when TCJA doesn’t apply, make sure you meet the above criteria. You should meet all three criteria in order for your moving costs to be deductible. Alternatively, you may qualify for an exception. Military personnel don’t have to pass the distance test, for example. And if you’re moving with a spouse, only one of you must meet the criteria. Look into the exceptions if you need to.
Know what you can and cannot deduct
You can deduct moving expenses if they are:
- necessary to the move
Both relocation and traveling expenses can fit this definition. This means that you can deduct the costs of professional movers, storage rental, packing supplies but also gas for your car and even lodging you might need if you’re traveling far for your move. There’s a standard mileage rate that you can use to calculate the traveling part of the expenses. But you can also keep the receipts for gas, oil, parking, and tolls and add those up instead.
What you cannot deduct are expenses related to buying or selling a home, traveling in order to buy or sell a home, meals during the relocation, and anything that your employer has already reimbursed you for.
Fill out and submit the right form
If your relocation fits the criteria to be deductible and you’ve calculated your expenses, you can now fill out the tax return form. The form you need is called Form 3903 and is specifically for deducting relocation expenses. It is not too hard to fill out either. On the first line, you’ll need to put your moving and storage expenses. The second line is for your travel and accommodation expenses. You add those up on the third line and finally fill in the fourth line with what your employer has reimbursed already. If your personal expenses are higher than the amount you’ve been reimbursed, you can deduct the difference.
Deducting moving expenses for a business
While only military members can deduct personal moving expenses, you can still deduct moving expenses for a business. So if you own a business and are paying for an employee to move, this is deductible for your business. Similarly, if you’re self-employed, you can deduct relocation expenses related to business assets.