Are Moving Costs Tax Deductible?

If you’ve been keeping up with the news, you would know that the federal tax deduction for moving expenses has now been removed. There are some exceptions, however, and certain states still permit the deduction on state income tax returns, but it varies depending on many factors. 

Below, we’ve compiled what you need to know to figure out if you still qualify for deducting any moving expenses from your tax returns. In case you don’t and our handy moving calculator stresses you out, we’ve also shared some tips on how you can cut back on moving costs even without a tax deduction.  

Can I Still Deduct Moving Expenses on My Federal Tax Return?

There’s one main exception to the new tax deduction rules, and that applies to members of the military across all states. Active military service members who are required to move homes because of a permanent station change, or move from a duty station to retirement, are exempt from length-of-work and distance requirements. 

If you fall under this category and have not yet taken your tax benefits, it might be worth it to revisit your return. The IRS has clarified that it is usually possible to amend a return for three years after you’ve filed it, or two years after the date you pay the tax. 

If you do qualify for a federal moving expense dedication, here are some things you should know:

1. Remember that only costs specifically related to your move are tax deductible. These include shipping, packing, traveling, storage unit, supplies, parking costs, rental trucks, etc. Other costs, such as meals you ate on your journey or the costs of setting up your new home, are not tax deductible. 
2. If your employer has reimbursed your expenses, they are not tax-deductible. 
3. There is also a time and distance criteria you should be aware of. For civilians, your new job must be at least fifty miles away from your old home. The time criteria requires that you should start that job within a year, before or after moving, and should work consistently for at least thirty-nine weeks in the following year. But keep in mind that civilians are no longer allowed to deduct moving expenses from their federal tax returns–they might do so from their state tax returns if the law permits it. 
4. If, however, you are retiring or could not work for any reason that wasn’t in your control, such as disability or a layoff, you can still claim the deduction. 

State Income Tax Returns: What You Should Know

Rules on state income tax returns and moving costs vary from state to state. Certain states’ regulations fall in line with the federal government, others update through legislation, while some have their own rules. 

It’s always recommended to check your local laws to see whether your state allows moving tax deductions. Connect with a tax advisor or tax software to understand your state’s current rules, as these regularly change.

Can Your Employer Help?

For taxpayers on the move, the federal tax overhaul can be a double whammy. For instance, if your employer reimburses the cost of your move, or offers a relocation bonus, that money becomes taxable income. 

Your employer will also be unable to claim reimbursed relocation costs as a business deduction on their own tax returns. This means that most employers tend to refrain from reimbursing these costs. 

However, some employers do recognize the need to go the extra mile for a valued, dedicated employee. They often try to compensate employees by “grossing up”–they will track and reimburse your moving costs and opt for paying their additional taxes due to the reimbursement. 

Large-scale companies often consult specialist relocation management firms to assist with this paperwork and cut down on losses. If your job requires you to move, it’s always worth asking your employer to offer you a relocation bonus or reimburse the cost of your move. 

How to Cut Moving Costs

Moving can be quite heavy on the pocket, especially if you’re moving across the country. If you are not eligible for a moving cost tax deduction and your employer is of no assistance, you can still do certain things to cut back on professional moving costs and make things easier for yourself. These include: 

1. Timing your move appropriately–try and book your move during the off-season, on a weekday as opposed to a weekend, and in the middle of the month instead of the end or beginning. This can make a significant difference in your bill. Pre-booking is also a great idea–if your job requires you to move six months from now, book a company as soon as you accept the offer. The earlier you book, the more you can save. 
2. Instead of hiring expensive additional services, pack, load, and unload your items by yourself. Hire experts only for tasks too big to handle on your own. 
3. Declutter your belongings–sort through your stuff and donate, sell, lend, or discard any belongings you don’t really need. The lower the weight of your item, the less moving will cost you. 

For the most cost-effective professional moving services sure to take the stress out of any move, choose movers from NDMS. Contact us today for your free, no-hidden-fee moving cost quote!