New Law Knocks Out Moving Expense for Many Taxpayers:
You may be considering moving to another location and be wondering what expenses you will be able to deduct.
Moving expenses are now mostly nondeductible, 2018–2025. First the bad news—the Tax Cuts and Jobs Act (”TCJA,” P.L. 115-97, 12/22/2017) temporarily suspends the moving expense deduction for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, except in the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military order and incident to a permanent change of station. This means you won’t be able to deduct your moving expenses for 2018–2025.
Larger companies may have a policy of reimbursing moving expenses. This is no “home run” either, since any reimbursement you receive from your employer for moving expenses for 2018–2025 will likely need to be included in your income, as the TCJA has suspended the exclusion from income of qualified moving expense reimbursement for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026.
After 2025: The law reverts back to the old pre 2018.
The old law is discussed below and is NOT applicable until 2026, unless Congress changes it once more:
Starting in 2026, you’ll be able to deduct the expenses for a trip (for you and your family) to a new home and for moving your furniture and household goods (see below), if you satisfy the distance and period-of-employment requirements below. If you meet these two tests, you’ll be able to deduct your moving expenses whether or not you itemize your deductions.
Distance test: The distance from your old residence to your new job location must be at least 50 miles more than the distance from your old residence to your old job location. (But, the distance from your new residence to the new job can’t be greater than the distance from your old residence to the new job, unless you’re either required to live in the new location or your time or cost of commuting are being reduced.)
Period-of-employment test: To qualify for the moving expense deduction, you must either:
(1) work full-time as an employee for 39 weeks during the 12-month period after arriving at the new location, or
(2) work full-time as an employee or perform services full-time as a self-employed individual for 78 weeks during the during the 24-month period after arrival, of which not less than 39 weeks are during the first 12-month period.
If you’re an employee only, you must meet the 39-week test in item (1), above. If you’re self-employed, you must meet the 78-week test in item (2), which also includes a 39-week test. If you’re self-employed and an employee at the same time, your principal place of work determines which test applies. If you’re at various times an employee and self-employed, and you don’t meet the 39-week test based on employment alone, you can qualify by meeting the 78-week test through a combination of employment and self-employment.
Either you or your spouse can satisfy one of the above period-of-employment tests, but weeks worked by one can’t be added to weeks worked by the other.
Leave or vacation time counts as employment time, and so do involuntary absences because of illness, strikes, shutouts, and natural disasters. And less-than-6-month off-season periods of seasonal-basis employment or self-employment count if covered by your employment contract or if you perform services as a self-employed person both before and after off-season.
This period-of-employment requirement will be waived if, after you get a job in which you could have reasonably satisfied this test, you’re laid off or fired other than for willful misconduct or are transferred by the employer for the employer’s benefit. The minimum period will also be waived if you die or are disabled.
Deductible moving expenses. If you meet the above tests you’ll be able to deduct the following expenses—in years after 2025—of moving yourself and the members of your household (but not tenants or employees) to the new location:
The cost of moving household goods and personal effects. This includes the cost of packing, crating, transporting, storing and insuring (for any consecutive 30-day period after the move), connecting and disconnecting utilities and shipping the car and household pets. Expenses of moving household goods or personal effects from a place other than the old residence are deductible only to the extent of what it would cost you to move them from the old residence. The cost of moving items bought en route isn’t deductible.
Expenses of travel (including lodging but not meals) from the old residence to the new. The cost of a single trip for you and for members of your household will be allowed, but you needn’t travel together at the same time. If you use your car for travel, you’ll be able to deduct either the cost of gas and oil (accurate records must be kept) or a standard mileage rate (for example this was 17¢ per mile in 2017 and 19¢ per mile in 2016) plus parking fees and tolls. General maintenance, repairs, insurance or depreciation aren’t deductible.
Lodging expenses for the day you arrive in the new area, and the cost of lodging in the old area within one day after you could no longer live in the old home because your furniture had been moved. Note that pre-move and temporary living house-hunting expenses won’t be deductible.
There will be no dollar limit on the amount of the expenses, but you’ll only be able to deduct reasonable costs. That means the expenses can’t be lavish or extravagant. And you have to move by the shortest and most direct route available by the conventional mode of transportation used and in the shortest time commonly required to travel that distance. Side trips, for example, won’t be deductible.
The expenses must generally be incurred within a year from when you start working at the new location, but expenses may be postponed for a reason such as allowing your child to finish school.
The expenses will be deducted in the year(s) in which you pay them. You may deduct the expenses even if you haven’t satisfied the minimum employment period by return time. If you later can’t satisfy the requirement, you must either include in income the amount you deducted, or file an amended return for the year of the deduction with the deduction eliminated. You also can wait and claim the deduction on an amended return or refund claim when you have satisfied the minimum employment period.
If you’re reimbursed by your employer for your expenses or if your employer pays them directly, you won’t have to include the reimbursements or payments in income after 2025 if you properly account to your employer and you could have deducted the expenses had you paid them yourself. (Of course, you get no deduction for any amounts you don’t have to include in income.) Excludable expenses won’t be included in “wages” or any other taxable amounts on your Form W-2, but excludable expense reimbursements your employer pays directly to you will appear for information purposes only in Box 12 of the W-2 as Code P.
It’s important that you keep records of distances from old and new residence to old and new job, dates of travel and arrival to the new area, employment periods, and records and receipts for your moving expenses, to support your deduction.
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