Are moving expenses tax deductible?
In most cases, you won’t be able to deduct these costs
Moving is expensive, especially if you have a moving company handle the bulk of it. While a small number of Americans can still claim a tax break on moving expenses, most can’t. Given the constantly evolving laws and complicated paperwork associated with filing taxes, it can be tricky to determine if your expenses are deductible and how they should be reported. We’ll guide you through the complexities and help you figure out if the new exceptions apply to you.
Key insights
- Most Americans’ moving expenses don’t qualify for federal tax deductions.
- Some active-duty members of the U.S. armed forces who relocated are eligible for federal tax deductions via IRS Form 3903.
- Some state tax systems still allow members of the general public to deduct moving expenses.
Which moving expenses are tax deductible?
In 2017, former President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) into law, which made moving expense claims on federal taxes a thing of the past for most Americans. A handful of states still offer moving deductions to the general public, including Massachusetts and California. But federally, only a few special cases warrant moving expense claims.
» MORE: How to file back taxes
A move is considered tax deductible if you’re either an active-duty member of the U.S. armed forces and have moved permanently due to military orders or if you’ve recently retired from active duty and moved away from your last post within one year of retirement.
“Starting in 2018, the Tax Cuts and Jobs Act eliminated moving expenses as a tax deduction unless you are an active-duty member of the armed forces,” said Krystal Pino, a certified public accountant and founder of Nomad Tax, a tax consultancy for digital nomads.
If you’re an active-duty or recently retired member of the U.S. armed forces and qualify to deduct your moving expenses, you can do so on IRS Form 3903 as an attachment to your Form 1040. A spouse or dependent of a U.S. armed forces member who died, was imprisoned or deserted may also qualify.
If you’re still uncertain whether or not you qualify for a moving expenses tax break, the IRS provides a tool to help you determine which moves qualify. Once you’re confident that you meet the requirements, the next step is calculating the total of your qualified moving expenses.
Starting in 2018, the Tax Cuts and Jobs Act eliminated moving expenses as a tax deduction unless you are an active-duty member of the armed forces.”
If you qualify, moving expenses for your spouse and dependents can be deducted as well. But only “reasonable” moving expenses are deemed deductible. Expenses such as rental trucks, gas, short-term storage, packing materials and insurance can usually be deducted. Travel expenses like oil, parking fees and tolls are fair game too. Stopovers to sightsee or make side trips are not considered deductible expenses, however.
If you choose to deduct moving expenses based on mileage instead of adding up the receipts of moving-related expenses, be aware that the moving expenses mileage rate is much lower than the business expenses mileage rate. The 2022 IRS mileage rates for business travel were 58.5 cents and 62.5 cents per mile for the first and second halves of the year, respectively. The rates for moving, however, were only 18 cents and 22 cents per mile for those same periods.
» LEARN: Tax deductions for homeowners
IRS Form 3903
Form 3903 is requisite for those who plan to deduct moving expenses. Applicable expenses for the form include shipping fees, hotel stays and travel costs (like gas). Also note that if you’ve moved more than once, you’ll need to fill out two sheets. To complete the form, we recommend having your W-2 handy.
- On line 1 of the form, include shipping and storage costs for packing and moving your household belongings.
- On line 2, write in any travel, lodging and gas fees you incurred.
- On line 4, add reimbursements you received from the government if applicable. This amount should appear in box 12, code P on your W-2.
- Check to see if your reimbursements are greater than your expenses. If so, the difference will become taxable income. If not, you can deduct the difference.
- Attach your Form 3903 to your Form 1040 and send it to the IRS. Don’t forget to keep a copy for your records.
Tax forms can be tricky, and errors are common. Here are a few nondeductible items people often make the mistake of including:
- Expenses already reimbursed by the government
- Cost of meals while moving
- Extravagant lodging that incurred unnecessary expenses
- Mortgage fees, security deposits or home improvement expenses
- Storage costs outside the permitted 30-day period following your move-out date
According to the IRS, other common errors people make when filing their taxes include filing too early, misspelling names and neglecting to sign forms. Make sure to slow down and double-check your forms. A tax professional can help.
FAQ
Who is eligible to claim moving expenses on their tax return?
Active-duty members of the U.S. armed forces who have permanently moved due to military orders can deduct moving expenses on their tax return, as can those who recently retired from active duty and moved away from their last post within one year of retirement. A spouse or dependent of a U.S. armed forces member who has died, was imprisoned or deserted may also qualify.
What happens if I receive reimbursement from my employer for my moving expenses?
If the reimbursement amount you received from your employer exceeds your deductible moving expenses, the difference will be taxed as income. If the reimbursement amount is less than your moving expenses, the difference may be deductible.
What documentation do I need to support my claim for tax-deductible moving expenses?
You don’t need to send documentation like bank statements, credit card statements or receipts to the IRS if you deduct moving expenses. But you should keep this documentation on file in case you’re audited.
What is the Tax Cuts and Jobs Act of 2017?
Former President Trump signed the Tax Cuts and Jobs Act (TCJA) into law in 2017, which changed deductions, depreciation, expensing, tax credits and other tax items. TCJA increased the standard deduction and limited the applicability of many itemized deductions, including moving expenses.
Article sources
- H&R Block, “ Moving Expenses Deduction .” Accessed March 21, 2023.
- IRS, “ Can I Deduct My Moving Expenses? ” Accessed March 21, 2023.
- Intuit, “ IRS Form 3903: Are Moving Expenses Tax Deductible? ” Accessed March 21, 2023.
- IRS, “ Common tax return mistakes that can cost taxpayers .” Accessed March 21, 2023.
- IRS, “ Tax Cuts and Jobs Act: A comparison for businesses .” Accessed March 21, 2023.
- IRS, “ IRS increases mileage rate for remainder of 2022 .” Accessed March 29, 2023.
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