At some point in your life, you may need to relocate for work, and we all know that moving is expensive. Though the Tax Cuts and Jobs Act (TCJA) has eliminated the moving expense deductions for most taxpayers, you can still claim a certain deduction for relocating, storage, and travel expenses.
Here’s all you need to know about the moving expenses tax deduction, its requirements, and how to claim this deduction in 2022.
What is the moving expenses tax deduction?
According to the IRS’s definition, moving expenses are costs incurred by a taxpayer related to relocating for work or being transferred to a new location. Moving expenses are considered adjustments to income. So, you can deduct these expenses even if you don’t itemize your deductions.
The moving expenses tax deduction covers the reasonable costs of moving your personal belongings and household items to the new location, such as:
- The expenses for yourself and other members of your household to travel to the new location
- The cost of oil, gasoline, parking fees, and highway tolls when traveling to the new location with your personal vehicle
- Airline and train tickets costs
- You can even deduct the cost of renting a storage unit for up to 30 days if you cannot move into your new house immediately after leaving your former house.
The Tax Cuts and Jobs Act of 2017 abolished the deduction of moving expenses for tax years 2018 through 2025, except for members of the military on active duty who relocate due to a military order. If you’re a member of the US army, you can file Form 3903 to claim moving expenses as federal income tax deductions.
However, you can still claim your moving expenses deduction if your move is work-related and passes the time and distance tests.
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- How to File Taxes as an Independent Contractor: A Step-by-Step Guide
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What are the requirements for claiming your moving expenses tax deduction?
To be qualified for the moving expenses tax deduction, you must pass one of these tests:
The moving expenses tax deduction does not apply to costs incurred for relocation within the same town. Your new job must be at least 50 miles away from your old home. If your previous commute was five miles one way, the distance between your new job location and your old home must be at least 55 miles. The IRS requires you to employ the shortest commutable paths between two places when determining whether you meet the distance requirement.
You must work as a full-time employee for a minimum period of 39 weeks during the initial 12-month period starting on the day you arrive in the new location. You can still meet this requirement even if the 39 weeks are not consecutive and you work for different employers. The IRS does not specify how many days or hours you must work per week to be considered a full-time employee; instead, it depends on your industry’s commonly-accepted standard.
How to claim your moving expenses tax deduction in 2022
Moving expenses are one of the few tax deductions that you can claim before knowing if you meet the requirements. Because of the 12-month time limit, most taxpayers will not be able to pass the time test until the next tax year. However, the IRS allows taxpayers to claim the moving expenses tax deduction in the year that they relocate.
To claim the deduction, you must list all of your relocation expenses on Form 3903 and attach it to your personal tax return for the year in which you relocated. If you didn’t meet all requirements by the end of the 12-month period, you must reverse the deduction. You can either file the original deduction amount in “other income” on your next tax return or modify the original form to exclude the moving expenses tax deduction from the tax calculation.
The bottom line
We understand that moving is expensive. However, with a good understanding of the state moving expense deductions that you’re still eligible for, you can make the best out of your deductions, and use allowed strategies to lower your taxes.
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