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Are Moving Expenses Tax Deductible?
By Cassidy Horton MONEY RESEARCH COLLECTIVE
Moving can be really expensive. And if you’re in the process of relocating, you may be wondering, “Are moving expenses tax deductible?” The unfortunate news is that the 2017 Tax Cuts and Jobs Act (TCJA) restricted the moving expenses tax deduction to active duty military personnel who move as a result of a permanent change of station.
If you think you may qualify, understanding how the moving expenses tax deduction works can help you maximize your savings.
Table of contents
- What are moving expenses?
- Are moving expenses tax deductible?
- How to qualify for counting moving expenses as tax deductions
- What moving expenses are tax deductible?
- How to claim the moving expenses deduction
- Are moving expenses tax deductible FAQs
- Summary of are moving expenses tax deductible?
What are moving expenses?
Moving expenses are the costs associated with relocating to your new residence. This can include things such as hiring an interstate moving company, buying packing materials, paying for gas and lodging, and renting a storage unit for your belongings.
Are moving expenses tax deductible?
Unfortunately, the moving expense tax deduction is only available to members of the US armed forces who relocate because of a military order or permanent change of station. This rule will be in effect from 2018 to 2025; it’s unclear what the law will be after that. So at present, most people no longer qualify for the deduction.
A “permanent change of station” means that you’re in the military and are ordered to:
- Move from your home to your first active duty post
- Move from one permanent post to another
- Move from your last post to your home (or somewhere else in the U.S.) within one year of your active duty status ending
If you qualify, you can deduct expenses for yourself, as well as your spouse and dependents. But you must claim the deduction in the tax year you move.
TIP: Still not sure if you qualify for the moving expenses tax deduction? The IRS has an online test you can take to find out. It takes about nine minutes to complete.
Which states allow a moving expense deduction?
Although the TCJA suspended the federal moving expense deduction for most taxpayers, a few states will let you deduct moving expenses on your state tax return. These include:
- Arkansas
- California
- Hawaii
- Massachusetts
Exact requirements vary by state, but in most cases, you must have moved due for work and be able to pass the distance and time test (which we’ll talk about next).
How to qualify for a moving expense tax deduction
Prior to the TCJA, you could claim the federal moving expense tax deduction if you were relocating for work and could pass these two tests:
Distance test
To pass the distance test, your new job location had to have been at least 50 miles farther from your old home than your old job was. For example, if your old job was three miles from your home, your new workplace needed to be at least 53 miles from that same home.
Time test
To qualify for the time test, your start of work had to be close to your moving date. This is because you were required to work full-time in your new area for at least 39 weeks during the first 12 months after you move. So if you moved to a new city in September and were on track to work full-time at least 39 weeks out of the next 52 weeks following your move, you could have claimed the deduction.
What moving expenses are tax deductible?
In general, military personnel can claim any moving costs associated with:
- Hiring a moving company
- Packing and transporting your household items to your new home
- Connecting or disconnecting utilities
- Shipping your car
- Transporting your pets
- Storing your items during transit or international move
- Insuring your items until they get to your new home
- Lodging on the way to your new home
- Taking a plane, bus, train, or other forms of transportation to get to your new home
- Driving your car to your new home (including gas, oil, tolls, and parking fees)
If you use your car to move, you can claim expenses one of two ways:
- Actual expenses: With this method, you keep a tally of all your out-of-pocket expenses for gas, oil, parking fees, and tolls.
- Standard mileage rate: With this method, you use the standard mileage rate—which is currently $0.16—to get reimbursed for gas and oil. However, you still add on your actual expenses for tolls and parking fees.
How to claim the moving expenses deduction
You’ll need to fill out IRS Form 3903 and attach it to your federal tax return to claim the moving expenses tax deduction. This deduction reduces your taxable income for the year, and you can claim it even if you take the standard deduction.
Form 3903
Form 3903 is a rather short form consisting of only five lines, so it’s fairly simple to fill out compared to other tax documents. It looks like this:
Here’s a quick overview of how to complete IRS Form 3903:
- Line 1 is where you list your total transportation and storage costs, including anything you paid to pack, crate, or move your items.
- Line 2 is where you list all the travel expenses you incurred while moving from your former home to your new home, including gas, parking, and lodging (but excluding meals and food).
- Line 3 is where you add the totals from Line 1 and Line 2 together.
- Line 4 is where you enter any government reimbursements you received for your move. You can find this number on your W2 form.
- Line 5 is where you figure out if your expenses are tax deductible.
- If Line 3 is more than Line 4, you can’t deduct any moving expenses.
- If Line 3 is less than Line 4, subtract Line 4 from Line 3 to get your total moving expense deduction. You then enter this number on Form 1040, which is your individual income tax return.
Are moving expenses tax deductible FAQs
Can you claim relocation expenses on your taxes?
If you're in the military and are required to move because of a permanent change of residence—i.e. you're changing posts, moving to your first post, or moving home from your last post—then you should be able to claim relocation expenses on your taxes.
If you're relocating due to a regular job change, you're no longer allowed to claim these expenses on your taxes as of 2018. That said, you can cut down on moving costs by:
- Packing up everything yourself. There are trade-offs here as this method can be really time-consuming. However, it can save you the most money.
- Getting free boxes. Many local businesses (like grocery stores) are willing to give you empty boxes for free. You can also search for free boxes on Facebook Marketplace or Craigslist.
- Hiring a moving company to facilitate everything for you. Moving companies are fast and efficient. Using one could allow you to work longer at your current job and limit the amount of time you need to relocate. If you go this route, start by searching for moving companies in your state—whether it's moving companies in Florida, moving companies in Kansas, or moving companies in California, for instance. You can also try looking for businesses in your city (e.g. moving companies in Fresno). Compare rates and services to find the right company for your needs and budget.
Is there a limit to how much you can deduct for moving expenses?
Yes. You can only deduct qualifying expenses the military doesn't reimburse you for.
For example, if the military gave you $10,000 to move and you only used $7,000 of it, you wouldn't be able to deduct any expenses and the extra $3,000 you pocketed may get added to your gross income for the year.
What are the moving expenses deduction limits?
There aren't any hard-and-fast deduction limits for moving expenses. However, there are two restrictions you need to keep in mind:
- You can't claim expenses indirectly related to your move (such as the cost of meals, selling your home, breaking a lease, or doing some sightseeing during your move).
- You can't claim any expenses reimbursed by the government. So if you hire one of the top long-distance moving companies to relocate you from Florida and Washington state—and the government reimburses the full thing—you can't claim the moving expenses tax deduction.
Which moving expenses are not deductible?
We've already talked about how you can't claim any moving expenses that are reimbursed by the government. This tax deduction is for unreimbursed expenses only.
Beyond that, the IRS also won't let you claim any expenses that aren't directly related to your move. This includes, but isn't limited to:
- Any meals or food bought on the way to your new home
- Any expenses you incur while "stopping off" or sightseeing during your move
- Expenses related to renting or breaking a lease
- Lost security deposits
- Expenses related to buying or selling your home (i.e. closing costs, mortgage points, house hunting trips, etc.)
- Car tags or driver's license fees
- Storage fees—except those collected during transit or an international relocation
Summary of are moving expenses tax deductible?
While the moving expenses tax deduction is no longer available to civilians, military personnel can use it to cut down on the cost of relocating. This includes costs associated with hiring movers, transporting household goods and personal effects, insuring your belongings during transit, and more.
Just keep in mind that you can’t claim any deductions on expenses that were reimbursed by the government. Only net out-of-pocket costs qualify.
If you have any specific questions about the moving expense tax deduction, consider talking to a CPA or tax professional. Otherwise, all you need to do is use Form 3903 to claim the deduction.
And if you haven’t moved yet, consider shopping around for one of the best moving companies to take care of everything for you. That way you don’t have to deal with the stress and hassle of it all.
Cassidy Horton is a finance writer based in Seattle, Washington. With an MBA and a bachelor's in public relations, her work has been published over a thousand times by The Balance, Finder.com, Money Under 30, Clever Girl Finance, and many more. Cassidy is a self-confessed money nerd who’s passionate about helping people find financial freedom. Oh, and she really loves cats.