As the warm months approach, many people choose to relocate, which often leads to additional financial burdens. The moving expenses associated with relocation, such as fuel, packing supplies, moving services, and insurance, can quickly accumulate and impact one’s budget.
When the time comes to relocate, it is expected to encounter additional expenses such as closing costs and security deposits that coincide with the move. Managing these financial obligations simultaneously can create a significant burden.
In the past, individuals could claim moving expenses as deductions on their taxes if they met certain criteria. However, due to the Tax Cuts and Jobs Act (TCJA), most taxpayers can no longer deduct moving costs on their federal tax returns. Despite this change, a provision allows specific military personnel and their families to still qualify for this deduction.
What Moving Expenses Should I Tax Deduct?
In the event that you are a member of the armed forces on active duty under military orders, you are eligible to claim deductions for the expenses incurred during your relocation. Specifically, you can deduct the costs associated with moving to your designated residence but not those related to any previous trips made in search of suitable housing.
When it comes to practical applications, it is possible to subtract the expenses related to packing and transporting your belongings. However, expenses for purchasing new decorations that may complement your new living space are not deductible. Additionally, you can claim the cost of storage for a maximum of 30 continuous days following the move, especially if your new residence is not fully prepared.
In conclusion, it is also possible to subtract any expenses related to accommodations for relocating from your former residence to your new place. However, it is important to note that you are unable to deduct the expenses for meals. It is crucial to remember that any reimbursements received for these costs cannot be deducted. Only the expenses that have not been reimbursed are eligible for deduction.
In the case of active-duty Armed Forces personnel who are eligible, expenses for air travel to relocate to a new residence can be deducted. Alternatively, for those who choose to drive, expenses such as fuel and oil can be tax deducted at a rate of 22 cents per mile in 2023 and 21 cents per mile in 2024.
Who Can Tax Deduct Moving Expenses?
Commencing from the year 2018, individuals eligible to claim deductions for their relocation costs on their federal tax returns are required to belong to the Armed Forces in active service and be relocating based on military directives for a permanent change in duty station.
From 2018 until 2025, the deduction for moving expenses was removed for various taxpayers under the existing tax legislation. However, once 2025 passes, the law will switch back to its previous form. Subsequently, all taxpayers will regain the eligibility to deduct specific expenses related to moving and journeying to a new residence.
How To Tax Deduct My Moving Expenses?
Upon meeting the eligibility criteria for deducting relocation costs, the process involves claiming this deduction through Form 3903. Form 3903 is a crucial document that must be submitted along with your federal tax return. The aggregate sum calculated through Form 3903 will be carried over to line 14 of Schedule 1, designated for moving expense deductions. Subsequently, this figure carries forward to Form 1040, contributing to the reduction of your adjusted gross income.
Does Moving Expense Tax Deduction Apply to State Tax Returns?
In certain regions such as California, there remains a provision for a deduction in your state tax filing. Even if you are ineligible for a federal deduction, you can input your relocation costs in PriorTax. Should your state permit this deduction, a dedicated Tax Professional from PriorTax will assist you in including the permissible amounts in your state tax return.
