The recent tax law introduced the Tax Cuts and Jobs Act, which brought some significant changes to the tax code and eliminated certain deductions. For most taxpayers, moving expenses are not deductible on the federal income tax returns anymore, but with specific conditions attached, active-duty military personnel can sometimes still qualify for the deductions. Here are the current rules and how they are applied.
Tax deductions for moving expenses
Moving expense deductions were primarily eliminated for taxpayers post-2017 tax reform until at least 2025. The only exceptions are that if you moved in 2017 or preceding years and didn’t claim that moving expense deduction, then you can still amend taxes for the eligible moving expenses. The general rule is that moving expenses are not deductible for people who moved after 2017, except for active-duty military members moving because of military orders.
So for this type of mover, if you have unreimbursed moving expenses, you have to file IRS Form 3903 with your Federal income tax return, Form 1040. These expenses should be incurred as a result of a PCS payment that covers the taxpayer, the spouse, and dependents, but not reimbursement or direct government payment of any portion of it.
Also, there are states that still allow moving expenses for their state deductions; if your state allows this, then you have to keep proper records of all your moving expenses and any other criteria that your state set for this.
What qualifies as Moving Expenses?
To claim moving expenses, they must be both reasonable and necessary. Qualifying costs may include:
- Transportation Costs: Gas, mileage, or oil for your vehicle, as well as rental truck fees.
- Short-Term Storage: Temporary storage for household items during your move.
- Packing and Shipping: Costs related to packing materials and shipping your belongings.
- Travel and Lodging: Hotel stays during a long-distance move. Meals, however, are not deductible.
For 2024, the IRS has set a standard mileage rate of 21 cents per mile for calculating travel expenses. Alternatively, you can track actual transportation costs and deduct those instead.
Military-specific rules
For active-duty military members, the moving expenses must result directly from a PCS. Eligible costs include:
- Packing and shipping personal items.
- Lodging and travel costs, excluding meals.
- Moving expenses not covered by employer reimbursement or the government.
These expenses are reported on IRS Form 3903. If the total reimbursement exceeds your out-of-pocket costs, the excess must be reported as taxable income.
Time and distance tests for Non-military taxpayers
While the moving expense deduction is suspended for most taxpayers, understanding the traditional time and distance tests may help if you’re filing an amended return for a move before 2018.
1. Time Test: You must work full-time for at least 39 weeks within the first 12 months at your new job location. Exceptions may apply if family members cannot relocate immediately due to medical care or schooling.
2. Distance Test: The distance from your old home to your new workplace must be at least 50 miles farther than the distance from your old home to your old workplace.
These tests do not apply to military personnel filing under a PCS.
Filing with IRS Form 3903
Military members should use Form 3903 to detail eligible moving expenses:
Line 1: Costs for shipping and storage of household items.
Line 2: Travel and lodging expenses.
Line 4: Reimbursements for moving expenses not included in box 1 of your W-2 (check box 12, code P).
If reimbursements exceed your expenses, you cannot claim the deduction and must report the excess as taxable income.
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