The Tax Cuts and Jobs Act, signed into law in December 2017, changed a lot of rules in a short time. The number of changes has left a good number of American taxpayers with many questions.
If you happened to move for work last year or you’re thinking about moving this year, expenses may be on your mind.
You’re asking, “Are moving expenses tax deductible?”
This is just one of the many changes that came with the 2017 tax reform law. We’ll walk you through the new rules.
For 2017 or earlier, there was an IRS moving expenses deduction you could take advantage of. If you relocated for a new job, you might be able to claim some of your moving expenses.
The IRS moving expenses test measured two factors in determining if the move counted. The first was time. You had to be employed at the same job for 39 weeks following the move for it to be deemed necessary.
The other was the distance test. The commute to the new workplace had to be at least 50 miles longer than the commute to your old job.
If you met both of these requirements, your moving expenses were likely tax deductible. The list of deductible moving expenses included:
- Renting a moving truck
- Hiring movers
- Buying supplies like moving boxes
- Paying for temporary lodging
- Disconnecting and connecting utilities in the old and new residence
Some expenses, such as meals you purchased during the move, weren’t deductible.
A Post-2018 Answer to “Are Moving Expenses Tax Deductible”
That was then, and this is now. Are moving expenses tax deductible for your 2018 taxes? What if you move in 2019?
In a word, no. Moving expenses are no longer tax deductible under the Tax Cuts and Jobs Act, which is in place until 2025.
If you move for any reason, you can’t deduct the costs of the move on your taxes for 2018 on. The law expires in 2025, so moving expenses may be deductible once more sometime in the future. For anyone moving right now, though, that doesn’t help.
If your employer asks you to relocate to a new office, you might want to think twice about the job offer. If you were planning to move to start a new job, you might want to reconsider the employers you apply to.
Changes to Employer Reimbursement Arrangements
The tax reforms removed moving expenses as deductions. They also changed taxation on employer moving funds.
Before 2018, any reimbursement your employer offered for job-related relocation was considered non-taxable. If a company transferred you to another city, they might offer some funds for the move.
Some companies offer reimbursement for moving expenses as an incentive for new employees. This is common in industries where skills are in high demand, but talent is scarce. It’s generally seen as a good approach to talent acquisition.
Effects on Employers
Under the new rules, employers now have to add any money for moving expenses to your taxable income. Employees may not think reimbursement arrangements are as attractive as they once did.
If you own a business, you may want to keep this in mind the next time you hire someone. You may also want to review any reimbursement program you offer to your employees. You want to make sure you’re giving them enough now that the IRS will be taking part of whatever you offer.
The Sole Exception to the Rule
There is one exception to the new rules about moving expenses, IRS documents state. If you’re a member of the United States Armed Forces, your expenses might still be eligible deductions.
This helps our servicemen and women, especially since their moves are often non-negotiable. It leaves most other Americans paying out of pocket for moving expenses. You may have to ask your employer for help.
It may leave you the difficult choice of shouldering costs or not accepting a new job.
Managing Moving Costs
Most people know moving for a new job usually represents a financial opportunity. The upfront costs of the move may be tough to swallow, but if the new job pays more, you’ll more than earn it back. If you’re taking a promotion or a step up the career ladder, you stand to earn much more.
The moving expenses deduction made it easier to justify the costs of a move. You’ll still earn the money back at the new job, but the deduction sweetened the pot a little bit more.
Since the moving expenses deduction no longer exists, you should focus on keeping moving costs low. Even if the expenses were deductible, you’d still have to pay for the move upfront. You’d merely be reimbursed later.
You may find it tempting to spend every penny your employer offers for moving expenses. Keep in mind this is being added to your taxable income. You’ll pay tax on it, and it could even put you into a higher tax bracket.
Keeping costs low is also a good idea if you have an employer reimbursement program. To help save on costs, you can:
- Move yourself instead of hiring movers or renting a moving truck
- Find free moving boxes or use containers you have
- Negotiate your moving date to find a cheaper time
- Have a yard sale or make some donations so you have less to move
If it helps, you can also negotiate your start date with your employer.
Don’t Let Taxes Stall Your Career
The answer to the question “are moving expenses tax deductible” at the current time is “no” for most Americans. That might change in the future. For now, the only people who can write off their moving expenses are members of the military.
There are ways to save money while moving, especially if it means being able to take on a great job opportunity. If you’re looking for more career advice, check out our blog for helpful tips.