This year, have you moved? Will you be relocating before the end of the tax year? If so, you must keep note of each of your moving costs in case any of them qualify as tax deductions.
Unfortunately, the IRS might not offer much assistance with your federal tax return. In 2018, federal tax benefits for moving costs were eliminated. They won’t likely come back until 2026.
Nevertheless, there are still possible exceptions that you might be able to use. You may be eligible for tax deductions on relocation expenditures in several states. Additionally, some personnel of the military forces is eligible for tax deductions.
Which Moving Expenses Can Be Deducted From Your Taxes?
The regulations governing which relocation expenditures are deductible were altered by the Tax Cuts and Jobs Act, or TCJA. If you’re relocating to begin a new career, your employer might repay you. If you are self-employed, the process is significantly more involved, therefore your best option is to speak with a licensed tax specialist.
For the time being, the TCJA only enables claiming specific moving-related expenses, such as:
- Parking expenses
- Using moving companies
- Transporting passenger cars to your new residence
- Temporary accommodations while making a direct trip to your new house
- Moving equipment
Rules for State Tax Deduction Qualification
There may be income tax deductions you can claim on your state return after you and your tax advisor confirm that you have complied with the time and distance restrictions. These apply to the states that chose to opt-out of the federal changes. They can be used for your New York, Arkansas, New Jersey, California, Pennsylvania, Massachusetts, or Hawaii state income tax return.
You may be allowed to deduct “reasonable expenses” from your taxable income when hiring movers to assist you with your move from your old house to your new workplace. Numerous of these are also covered under federal exceptions. You might be able to deduct the following expenses from your gross income using your tax preparation software:
- Packing materials
- Shipment charges
- Including a second place for pickup
- Temporary storage between homes for 30 days
- Utility connection and termination fees for both residences
Keep in mind that you cannot deduct the same expense twice by claiming it as a relocation expense and a business expense at the same time. Expenses related to buying, selling, or breaking a lease are also deductible.
Some Advice for Deducting Moving Costs
There are three fundamental guidelines that you should abide by when it comes to moving expense deductions. The guidelines are essentially the same for all types of tax deductions: When dealing with the IRS, make sure everything is documented, seek advice from a tax expert, and be truthful.
Even while keeping detailed records may seem laborious, they are essential. Do this whenever you receive a receipt, whether it be for purchasing packing items or authorizing a credit card charge from your moving company. Even if you are unaware of the standard mileage rate, you will never be able to benefit from it unless you keep track of your distance as you drive.
Locate a tax firm or expert who can convert all of your supporting papers into deductions. They will be aware of the ones you are eligible for. And they may uncover ones you are unaware of, and they will make sure you receive everything to which you are entitled. Why not let someone else deal with the burden of filing taxes when you have had to deal with the stress of moving?
Never try to get a deduction that doesn’t applicable to you or doesn’t exist. And never inflate the figures for a deduction that you are eligible for. You want to begin living in your new house. You’ll lose time filing an updated return if you make a mistake on your tax return. The worst-case scenario involves an IRS audit and dealing with overdue taxes, penalties, and interest.
How to Make a Moving Tax Deduction Claim
If you wish to deduct your relocation expenses, you should be aware that it’s one of the few deductions that you can use. Even before you know if your circumstances are eligible. Many taxpayers are unable to complete the 12-month time requirement until the year following their transfer. However, the IRS permits you to deduct your moving expenses for the calendar year in which you relocate.
To report all of your moving costs, use IRS Form 2901. Include this with your tax return for the calendar year that you moved. If you don’t complete fulfilling all requirements before the end of the 12 months, you’ll have to take the deduction back. Then, you’ll either modify your initial return to determine what your taxes should have been minus the deduction for moving expenses. Or you’ll include your original deduction as “other income” on your subsequent tax return.
Final Thoughts on Moving Costs
Even if they file an amended return, the majority of taxpayers won’t be able to deduct any moving expenses from their federal tax return until 2026. Expense reimbursements and travel reimbursements will probably resume after that to assist people with the costs associated with transferring from their old house to their new one. Thankfully, some moving costs are still tax deductible. Your ability to appreciate your new home and start a new life will increase in direct proportion to the amount of money you save by relocating! Contact us to find out more.