Your Guide to Moving Expenses Tax Deduction: What You Need to Know
Moving to a new home can be an exciting time, but it can also be expensive. The good news is that if you're moving for work-related reasons, you may be eligible for a tax deduction for your moving expenses. This can help to offset some of the costs of your move and put more money back in your pocket.
In this blog post, we'll provide you with a comprehensive guide to moving expenses tax deductions. We'll explain who is eligible for the deduction, what expenses are tax-deductible, and how to claim the deduction. We'll also provide you with some tips for maximizing the deduction and avoiding common mistakes.
Moving expenses tax deduction is a tax benefit offered by the IRS for those who have to relocate for work purposes. However, not everyone who moves for work will be eligible for the deduction. To qualify for the deduction, you must meet certain criteria, such as the distance between your old and new job locations and the length of time you spend working in the new location. We'll explain the eligibility criteria in detail so you can determine whether or not you qualify for the deduction.
Who is Eligible for the Moving Expenses Tax Deduction?
Not everyone who moves for work purposes is eligible for a moving expenses tax deduction. To qualify for the deduction, you must meet certain criteria set forth by the IRS. First and foremost, the move must be work-related. This means that you're moving because of a change in employment, either because you're starting a new job or because your current employer is relocating you. You must also meet certain distance and time requirements.
The IRS requires that your new job location be at least 50 miles farther from your old home than your old job location. For example, if your old job was located 10 miles from your old home, your new job must be located at least 60 miles from your old home to qualify for the deduction. Additionally, you must work full-time in the new location for at least 39 weeks during the 12 months following your move. If you're self-employed, you must work full-time in the new location for at least 78 weeks during the 24 months following your move.
It's also important to note that certain types of moves are not eligible for the deduction. For example, if you're moving to start your own business or to work as a freelancer, you're not eligible for the deduction. Additionally, if you're moving for personal reasons, such as to be closer to family or for better weather, you're not eligible for the deduction. It's important to consult with a tax professional or accountant to determine whether or not you're eligible for moving expenses tax deductions based on your specific situation.
What expenses are tax deductible?
If you're eligible for moving expenses tax deduction, the next step is to determine which expenses are tax deductible. Eligible moving expenses include costs associated with transporting your belongings from your old home to your new home, as well as travel expenses for you and your household members.
Transportation expenses include the cost of renting a moving truck or hiring professional movers, as well as the cost of packing and shipping your belongings. You can also deduct the cost of storage and insurance for your belongings while they're in transit. Additionally, you can deduct the cost of connecting or disconnecting utilities at your old and new homes, as well as the cost of shipping your car to your new location.
Travel expenses include the cost of lodging and meals during your move. You can deduct the cost of lodging for yourself and your household members for up to 30 days after you move out of your old home. You can also deduct the cost of meals for yourself and your household members during your move, subject to certain limitations.
It's important to note that not all moving expenses are tax deductible. For example, the cost of meals during your house-hunting trip is not tax deductible, nor are the costs associated with breaking a lease or selling your old home. Additionally, if your employer reimburses you for any of your moving expenses, you cannot deduct those expenses on your tax return.
How to claim the deduction?
If you're eligible for moving expenses tax deduction and have determined which expenses are tax deductible, the next step is to claim the deduction on your tax return. To do this, you must file IRS Form 3903, which is used specifically for claiming moving expenses deduction. You can file this form either as part of your paper tax return or electronically using tax preparation software.
When filing Form 3903, you will need to provide detailed information about your move and the expenses you incurred. This includes your old and new addresses, the distance between the two locations, the date you started your new job, and the total amount of your eligible moving expenses. You will also need to attach supporting documentation, such as receipts and invoices, to substantiate your claim.
It's important to keep in mind that claiming moving expenses tax deduction can be a complex process, and mistakes can lead to delays or even audits. It's a good idea to consult with a tax professional or accountant to ensure that you're filing your tax return correctly and maximizing your eligible deductions. Additionally, if you receive reimbursement from your employer for any of your moving expenses, you should report those reimbursements on your tax return and adjust your deduction accordingly.
Limitations and requirements
While moving expenses tax deduction can be a great way to save money on your taxes, there are some limitations and requirements that you need to be aware of. First and foremost, you must meet certain requirements in order to be eligible for the deduction. This includes moving for work-related reasons and meeting the distance and time test, which means your new job must be at least 50 miles farther from your old home than your old job was, and you must work full-time in the new location for at least 39 weeks during the 12 months following your move.
Additionally, there are limitations on the number of moving expenses you can deduct. You can only deduct the number of eligible expenses that exceed any reimbursement you received from your employer. For example, if your eligible moving expenses were $10,000 and your employer reimbursed you $8,000, you can only deduct the remaining $2,000.
It's also important to note that moving expenses tax deduction only applies to federal taxes. Some states may offer their own moving expenses deduction or credit, while others may not. Be sure to check the tax laws in your state to determine if you're eligible for any additional tax benefits.
If you're planning to move for work-related reasons, it's important to understand the requirements and limitations of moving expenses tax deduction and to keep detailed records of your eligible expenses. With careful planning and attention to detail, you can take advantage of this tax benefit and potentially save a significant amount of money on your taxes.
Recent changes in tax laws
It's important to stay up-to-date on changes in tax laws that may affect your ability to claim moving expenses tax deduction. In 2017, the Tax Cuts and Jobs Act was signed into law, and it made significant changes to the tax code, including the elimination of moving expenses deduction for most taxpayers.
Under the new law, only members of the military who are on active duty and move due to a military order are eligible for moving expenses tax deduction. This means that if you're not a member of the military, you won't be able to claim moving expenses deduction on your federal tax return.
However, it's important to note that some states may still offer their own moving expenses deduction or credit, even if the federal deduction is no longer available. Be sure to check the tax laws in your state to determine if you're eligible for any state-level tax benefits.
It's important to keep up with changes in tax laws that may affect your ability to claim moving expenses tax deduction. While the deduction is no longer available for most taxpayers at the federal level, there may still be state-level tax benefits that you can take advantage of. Be sure to consult with a tax professional or accountant if you have any questions or concerns about your tax situation.
Common mistakes to avoid
While claiming moving expenses tax deduction can be a great way to save money on your taxes, there are some common mistakes that taxpayers often make that can lead to audits or even penalties. Here are some mistakes to avoid when claiming moving expenses tax deduction:
Failing to meet the time and distance test: In order to be eligible for moving expenses tax deduction, your move must meet both the time and distance tests. The time test requires that you work full-time in your new location for at least 39 weeks within the first 12 months after your move. The distance test requires that your new workplace be at least 50 miles farther from your old home than your old workplace was.
Claiming non-eligible expenses: Not all moving expenses are eligible for tax deduction. For example, expenses related to house-hunting trips, meals during the move, or any expenses related to the sale of your old home are not eligible for tax deduction.
Not keeping accurate records: It's important to keep accurate records of all your moving expenses, including receipts, invoices, and bills. Failing to keep accurate records can make it difficult to support your deduction if you're audited.
Failing to consult with a tax professional: Tax laws can be complex and confusing, and it's important to consult with a tax professional or accountant to ensure that you're claiming all eligible deductions and avoiding common mistakes.
By avoiding these common mistakes, you can ensure that you're maximizing your eligible moving expenses tax deduction while minimizing your risk of audit or penalties.
Moving with Puma Van Lines
In conclusion, moving expenses tax deduction can be a valuable way to save money on your taxes if you're eligible and follow the necessary guidelines. However, it's important to understand the eligibility requirements, eligible expenses, and how to properly claim the deduction to avoid common mistakes.
At Puma Van Lines, we understand that moving can be a stressful and expensive process, which is why we strive to provide our customers with high-quality, affordable moving services. If you're planning a move, be sure to keep track of your eligible moving expenses and consult with a tax professional to maximize your potential tax savings.
Thank you for choosing Puma Van Lines for your moving needs, and we wish you a successful and stress-free move.