Moving Expenses and Your Taxes: A Homeowner’s Guide
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Moving costs add up quickly. Most local moves cost homeowners around $4,300, while long-distance relocations can reach $12,000. With such high expenses, many wonder about the possibility of a moving cost tax deduction to ease the financial burden.
Your wallet feels the impact of these expenses. Good news – you might qualify for tax benefits to help ease this burden. The rules have changed since 2018, but some valuable deductions still exist for specific situations. Understanding the current landscape of moving expenses taxes can help you make informed decisions about your relocation.
Military service members enjoy the most tax benefits for their moves. Several states also offer tax breaks to their residents who relocate. Even if you’re not in the military, your state might help reduce your moving costs through tax savings.
Let us walk you through the current moving expense rules. We’ll show you exactly what you can claim and how to get the most from available tax benefits. Our guide makes these complex tax rules simple to understand, helping you save money where possible on your federal tax return and state taxes.
Moving Expense Tax Rules Today
Tax rules for moving expenses changed dramatically in 2017. Here’s what you need to know before planning your move and considering the question, “Can I deduct moving expenses?”
New Federal Tax Rules
The rules are simple now – most people can’t deduct moving expenses anymore. The ability to deduct moving expenses ended in 2018 and stays this way until 2025 [1]. Your employer’s moving cost payments? Those count as taxable income now. Many wonder why are moving expenses no longer deductible, and the answer lies in the tax reform implemented by the Tax Cuts and Jobs Act.
Special Rules for Military Members
Good news for our service members! Military personnel still enjoy moving expense deductions. These benefits apply when you move due to a military order and permanent change of station [1]. This exception allows active-duty military to claim a moving expenses tax deduction on their federal tax return.
What can military members deduct?
- Moving your household items and personal effects
- Storage costs for 30 days
- Travel and hotel expenses (meals not included)
State Tax Benefits
Don’t worry if you can’t claim federal deductions. Seven states still help with moving costs [1], offering state-specific deductions:
- Pennsylvania
- New York
- Massachusetts
- New Jersey
- Arkansas
- California
- Hawaii
Each state writes its own rules about who qualifies and how much you can deduct. Check with your state’s tax office – you might save money even without federal deductions. For instance, are moving expenses tax deductible in New York State? The answer is yes, but with specific guidelines.
Want to plan ahead? Watch for changes in 2025 when current tax laws expire [1]. The rules might change again, possibly bringing back moving deductions for everyone.
Military Moving Expense Deductions
Welcome, service members! Let’s walk through your special tax benefits for moving expenses. You’re the only group that still enjoys these valuable deductions under federal tax law, allowing you to claim unreimbursed moving expenses on your tax return.
What Moves Qualify?
The IRS looks for a permanent change of station (PCS) when approving your moving deductions. Three types of moves qualify:
- Your first move from home to active duty
- Moves between duty stations
- Your final move home (within one year of ending service) [2]
Here’s something helpful – if your family moves to a different location than you do, both moves count as one qualifying relocation for tax purposes [4].
What You Can Deduct
Your PCS move comes with several deductible expenses:
- Moving your household items
- Packing and shipping costs
- 30-day storage fees
- Insurance for your belongings
- Travel to your new home (except meals)
- Places to stay during your move [5]
Moving overseas? You get extra benefits! Store your household goods during your entire foreign assignment and deduct the costs [6].
Paperwork Made Simple
Ready to claim your deductions? Here’s what you’ll need on Form 3903:
- List moving costs for your belongings (Line 1)
- Add travel costs and temporary lodging expenses (Line 2)
- Show any government payments (Line 4) [7]
Remember – you’ll only deduct what the government hasn’t paid for. Look for moving allowances in Box 12 of your W-2 (Code P) and list them on Form 3903, Line 4 [7]. Moving more than once this year? Fill out separate forms for each move [8].
Your State’s Moving Tax Benefits
Great news! Your state might help with moving costs, even though federal deductions are limited to military members. Let’s explore how your state could save you money on your next move through state tax breaks.
States That Help With Moving Costs
Seven states offer moving expense deductions or keep moving expenses out of taxable income [9]:
- Pennsylvania
- New York
- Massachusetts
- New Jersey
- Arkansas
- California
- Hawaii
New York and California stand out with extra benefits. These states help with moving costs and don’t tax qualified employer reimbursements [10]. This means you might be able to deduct moving expenses on your New York State income tax return.
What Each State Requires
Each state writes its own rules. Here’s what you need to know:
California’s Rules:
- Follows the old federal guidelines from before 2018
- Helps with both your costs and employer payments [11]
New York’s Benefits:
- Covers reasonable expenses related to moving
- Keeps employer moving payments tax-free [10]
Some states follow federal tax changes automatically, while others make their own rules [10]. Your benefits depend on where you live and the specific state-specific deductions available.
Getting Your State Tax Break
Ready to claim your moving expenses? Follow these simple steps:
- Check Your Eligibility
- Make sure you’re a state resident
- Look up your state’s rules
- See how employer help affects your claims
- Keep Your Records
- Save all moving expense receipts
- Track transportation expenses and storage costs
- Note any money from your employer
Watch for changes – state tax laws can shift each year [10]. Talk to a tax expert who knows your state’s rules. They’ll help you get every dollar you deserve from your relocation tax deduction.
The savings can really add up, especially for big moves across state lines. Just remember – state benefits work differently from federal tax rules [10]. Your tax expert can guide you through the details of claiming moving expenses on your tax return.
Employer Moving Money and Your Taxes
Let’s talk about what happens when your employer helps with moving costs. The rules changed in 2018, and we’ll show you exactly what this means for your wallet and gross income.
Money From Your Employer – What’s Taxable?
Your employer’s moving money counts as part of your wages through 2025. Employer reimbursements for moving expenses are considered taxable income [12]. This rule applies whether your employer pays the moving company or gives you the money directly. Only two situations dodge these taxes:
- Military members moving on orders
- Money received for moves before January 1, 2018 [13]
Uncle Sam wants his share – these payments face income tax, Social Security, and Medicare deductions [14]. Understanding these IRS rules is crucial for accurate tax reporting.
Tax Forms and Numbers
Your employer needs to handle these payments carefully:
- Put them on your W-2 as wages [15]
- Hold back 22% for federal taxes
- Take out Social Security (6.2%) and Medicare (1.45%) [15]
Making the Most of Your Benefits
Smart employers use tax gross-up to help their workers [16]. This means they give extra money to cover your tax bill. Here’s why it works:
- You get the full value of your moving expense reimbursement
- Nobody likes surprise tax bills
- Workers feel better about their relocation package
High earners (over $1 million) face bigger withholdings at 37% [14]. The good news? Companies can still count these payments as business expenses [17].
Watch your state rules – they’re often different from federal ones [14]. Your company’s payroll team should work closely with accounting to get everything right [14], especially when it comes to IRS relocation reimbursement guidelines.
Moving Tax Deductions: What’s Next?
The moving expense tax landscape might look very different after 2025. Let’s explore what changes could help homeowners save money on future moves and potentially answer the question, “Can I deduct moving expenses in 2023?”
Changes Coming in 2025
Mark your calendar for December 2025. The current tax rules expire then, and moving expense deductions might return to their pre-2018 form [18]. This change would help millions of taxpayers who haven’t been able to claim these deductions since 2018. The old benefit saved taxpayers about $1 billion each year [19].
Support for New Tax Benefits
Moving industry leaders want these deductions back. The Relocation Mobility Coalition leads this effort, including:
- Worldwide ERC (WERC)
- Moving & Storage Conference of American Trucking Association
- International Association of Movers
- National Association of Realtors
- Senior Executive Association
These groups study moving patterns and gather data to show why these deductions matter [19]. They believe tax breaks help workers move where jobs are needed, supporting the argument for reinstating the moving expense deduction.
Smart Planning Steps
The 2025 deadline creates opportunities. Here’s how to prepare:
- Keep Good Records
- Save all moving expense receipts
- Write down travel distances
- File everything for future tax claims
- Think About Timing
- Maybe wait until after 2025 for big moves
- Check your state’s current tax breaks
- Watch what your employer offers
Congress faces tough choices about these tax breaks [19]. Moving industry experts call worker mobility “the lynchpin of a strong economy” [19].
Military members can relax – their benefits stay the same through 2025 [12]. Everyone else should watch for updates and talk to tax experts about their plans [18], especially regarding IRS moving expenses 2023 guidelines.
The old rules required moves to be at least 50 miles for full-time work [19]. New rules might look different, especially with more people working remotely. We’ll keep you posted as these changes develop, including any updates on whether moving expenses are deductible in 2023.
Conclusion
Moving tax rules don’t have to give you a headache! While most federal moving deductions are on hold until 2025, you still have options to save money. Our military members enjoy the most benefits, with special tax breaks for their moves.
Don’t forget about state tax savings! Seven states want to help with your moving costs. These tax breaks can put real money back in your pocket, even without federal deductions. For example, if you’re wondering which states allow moving expense deduction 2022, check with your state’s tax authority for the most up-to-date information.
The tax world keeps changing, and 2025 might bring good news for everyone. Keep those moving receipts safe – they could be valuable soon. Smart homeowners stay ready for whatever changes come next in the realm of moving expenses taxes.
Want to make the most of your moving tax benefits? Talk to a tax professional who knows these rules inside and out. They’ll help you find every possible saving, whether you’re moving now or planning ahead, and guide you on what moving expenses are tax deductible under current laws.
FAQs
Q1. Are moving expenses tax deductible for most people in the United States? Currently, moving expenses are not tax deductible for most individuals due to changes implemented by the Tax Cuts and Jobs Act (TCJA) in 2017. This change is in effect through 2025.
Q2. Who can still claim moving expense deductions on their federal taxes? Active-duty military personnel are the only group that can still claim moving expense deductions on federal taxes when relocating due to military orders and a permanent change of station.
Q3. Do any states offer tax benefits for moving expenses? Yes, seven states currently offer moving expense deductions or exclude moving expenses from taxable income: Pennsylvania, New York, Massachusetts, New Jersey, Arkansas, California, and Hawaii. Each state has its own qualification requirements and deduction limits.
Q4. How are employer reimbursements for moving expenses treated for tax purposes? Under current federal tax law, employer reimbursements for moving expenses are considered taxable income and must be included in an employee’s wages. Employers must report these reimbursements on Form W-2 and withhold applicable taxes.
Q5. Will moving expense deductions be reinstated in the future? There’s potential for moving expense deductions to be reinstated after 2025 when the TCJA expires. However, this depends on future legislative decisions. Taxpayers should stay informed about potential changes and consult with tax professionals for the most up-to-date guidance on IRS relocation expenses.
References
[1] – https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/moving-expenses/?srsltid=AfmBOoqgPuMkk1jzZqJn0gAtJ8vUIp2sJObOeSNOU7_Gbsnw4_ULQyOx [2] – https://www.irs.gov/taxtopics/tc455 [3] – https://flyfin.tax/business-deductions/moving-expenses-tax-deduction [4] – https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/military-moving-expenses/?srsltid=AfmBOoqmNlMIKFMXiWnN6UO3t-A1ZjqzDgvOUvBIWq-AFBb-gfl3WN7g [5] – https://www.taxslayer.com/blog/military-pcs-tax-questions-and-answers/ [6] – https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/military-moving-expenses/?srsltid=AfmBOopQB0xnqCJIz-B–FMsNb7MUN0H8IUrLsqmwFRSvianksbYqjJ1 [7] – https://www.jacksonhewitt.com/tax-help/irs/irs-forms/form-3903/ [8] – https://www.irs.gov/pub/irs-dft/i3903–dft.pdf [9] – https://mileiq.com/mileage-guide/moving-expenses-tax-deduction [10] – https://www.americanexpress.com/en-us/credit-cards/credit-intel/moving-expense-tax-deduction/ [11] – https://turbotax.intuit.com/tax-tips/jobs-and-career/irs-moving-expense-deductions/L5podfG5I [12] – https://www.irs.gov/individuals/international-taxpayers/moving-expenses-to-and-from-the-united-states [13] – https://taxnews.ey.com/news/2019-0328-irs-clarifies-moving-expense-reporting-in-form-w-2-box-12 [14] – https://www.withum.com/resources/eliminating-moving-expense-deduction-impacts-employers/ [15] – https://www.accounting.uci.edu/moving/taxes.php [16] – https://www.experian.com/blogs/ask-experian/are-relocation-expenses-taxable/ [17] – https://hb.cpa/how-employers-can-help-employees-who-must-move/ [18] – https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/moving-expenses/?srsltid=AfmBOoqelgkT0neTM4w98s-fTyoupmYBLH3dFiOj_wwRCW0EMy_3070J [19] – https://www.talenteverywhere.org