Is moving a tax deductible expense?
If you’ve moved house in the last 12 months you may want to speak to your accountant before filing your next tax return. Some states still allow deductions for moving expenses.
Your accountant will rightly point out that the federal government suspended the tax deduction for moving in 2018 and that change will remain in place until 2025. We suggest that you seek professional Tax advice from your CPA as you will see below there are some instances that moving is or is not a tax deductible expense depending on a number of factors surrounding your move.
But if you live in New York, New Jersey, Pennsylvania, Massachusetts, Arkansas, California or Hawaii you may be eligible for a state tax break.
There are a few things to know about qualifying.
1. State by state
Check your state’s tax codes to find out if moving expenses are still deductible in your area as some states require separate legislation to incorporate any new Federal rules and didn’t change with the recent reforms. In New York’s case which normally updates in line with IRS changes automatically, legislation was passed clarifying which parts of the recent tax changes they were not adopting. As a result you can itemize deductions for New York State income tax purposes even if they aren’t listed on your Federal return, including moving expenses.
2. Time and distance
There are three time and distance rules to meet when qualifying to deduct moving expenses on your state tax return. Short local moves like those often made within New York City may not apply unless:
- The commute from your old home to your new job was 50 miles or more longer than the previous commute (from your previous home to your previous job).
- Your move was timed close to the start of work, at least within 12 months.
- You have worked full time at your new location for 39 weeks or more in the first year after your move date. However you are exempt from this requirement due to a disability or were laid off for any reason except misconduct. If you have to lodge a tax return before meeting this 39 week test, the IRS allows you to take the deduction in the year you move, on the understanding you will adjust it in the following year if the condition is not met. You can also change employers in your new location within this 39 week period as long as your work status is still “full time” at your second workplace. If you are self employed, this 39 week rule extends to 78 weeks in the first 2 years.
3. Reasonable Expenses
Once you’ve met those requirements on time and distance you can deduct expenses on state returns that have opted out of the federal changes, as long as those expenses are considered “reasonable”.
Reasonable expenses are considered:
- The cost of packing and shipping your belongings including packing supplies, crating, hiring a professional moving company and hauling a trailer.
- Moving belongings from a second location, like your parents home to your new location but you can’t make deductions for moving new belongings like furniture you purchased on your way to your new home.
- The cost of shipping pets to your new home
- Storage of your things for up to 30 days while they are in transit. This includes foreign relocation storage. If you are moving internationally, you may also be eligible for a foreign housing deduction.
- Insurance of your things while they are moved. There is a limit of 30 consecutive days on this deduction also, counted from the day your belongings leave your old home to the day they are delivered to your new home.
- The cost to disconnect or connect utilities at your new place and previous house
- Transport and lodging expenses while you are moving, for you and your family including car expenses and airfare. This applies if travelling via the most direct route available and not sight seeing or holidaying on your way to the new location. You can deduct car expenses as the actual out of pocket charges you paid for gas, tolls, parking and oil if you keep records or apply a standard mileage rate of 18 cents per mile. You can’t deduct maintenance, general repairs or depreciation. Food and meals costs during transit also do not qualify.
Other non deductible expenses to note are the costs of breaking your lease to move or expenses associated with buying or selling a home such as mortgage penalties, loss on the sale of a property and real estate taxes.
You are also prohibited from making a double deduction, that is claiming any of the above items as moving expenses as well as businesses expenses.
4. Employer reimbursed moving
If your employer paid for your moving costs (and you are a non-military taxpayer) a heads up that your company’s reimbursement is now included in your gross income.
Reimbursements used to be treated separately but now they will increase your tax bill as a result of your move for work. In more good news for the Empire State, New York was one of the states to provide exceptions and allow taxpayers to exclude reimbursements from their New York Adjusted Gross Income (NYAGI). When you’re calculating your NYAGI you can subtract your moving expenses and the reimbursement received during the tax year from your Federal Adjusted Gross Income (FAGI). You can also claim the expense in the year you were reimbursed, not the year of your move, for example if you booked and paid for a move in November 2020, which your employer reimbursed in December but was not scheduled to take place until January of 2021.
It’s worth noting that this adjustment doesn’t qualify if you move outside of the state, like moving from New York to LA. The instruction for filing NYS Form IT-203 explain the adjustment applies if only if you changed job locations in New York State or you started a new job in New York State.
As a rule, save all receipts, bills and mileage logs related to this transaction, including your Form W-2 and the statement of reimbursement from your employer.
If you are an employee of New York State itself applying for reimbursement, the documentation you need to provide to your employer includes receipts from a rental truck or the Bill of Lading from your mover. Check our Guide to Moving Terminology for a detailed explanation of this document and what to look for before locking in your move.
The recent tax change did not affect the military and we thank you with all our hearts for your service. If you are a member of the Armed Forces on active duty, you can deduct moving expenses on your Federal return if your move was the result of a military order or a “permanent change of station”. You may also deduct unreimbursed expenses for your spouse or dependent.
Deductible moving expenses in this case include household goods, personal property storage and travelling expenses like temporary lodging during the move, according to the IRS guide. You can also deduct the cost of gas, tolls and shipping your car as well as personal property however meals and food will not qualify. Use form 3903 to calculate your deductions and record them on your return.
6. If you moved before 2018
If you moved before the tax changes came into effect in 2018, your moving expenses may still be tax deductible if you meet the distance and time requirements. As we outlined above, they are: a commute of 50 miles or longer, moving within 12 months of starting your new job and working full time at your new location for 39 weeks or more in the first year after your move date.
Whatever your situation, the suspension of moving deductions on Federal returns is slated to be lifted on January 1, 2026. Congress may decide to make this a permanent change but for now, you have all the detail you need for the tax season ahead.
Please note we suggest that you seek professional Tax advice from your CPA.
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