Moving Expense Deductions

The Tax Cuts and Jobs Act eliminated the moving expense deduction for tax years 2018 through 2025, except for members of the military. Additionally, employer-provided expense reimbursements are no longer excludable from income, except for those in the military.

Unreimbursed moving expenses to a new full-time job or to a new location for the same job are generally deductible if they meet the 50 mile distance test and the 39 week or 78 week work test for remaining in the new location. However, the work test requirement need not be fulfilled to take the deduction by the due filing date. The moving expense deduction is claimed as an adjustment from gross income, so it can be claimed even without itemizng deductions. The deduction can also be claimed by people who were working only part-time or were unemployed and subsequently moved to a different location for a full-time job. Members of the Armed Forces can deduct the cost of moving their family overseas.

Each member of the family can deduct traveling costs, including 1 day of lodging before departure and after arrival. Vehicle expenses can be deducted by either deducting the actual costs of gas, oil, and even repairs, but not depreciation, or using the standard mileage rate, which is less than the mileage rate for business because it does not include the depreciation portion.

Parking fees and tolls are also deductible. However, meals are not deductible as a moving expense.

Other deductible costs include packing and transporting furniture and other household items, the cost of insuring the items, and for the storage of household goods for up to 30 consecutive days. Connecting and disconnecting utilities for household appliances are also deductible. Moving personal items from a place other than the home to the new location is also deductible, but only up to what it would have cost if the items were relocated from the home.

Moving expenses may be deductible even if the family moves up to one year later. If the spouse getting the new job moves to the new location for the new job, but the family stays behind, then their expenses will be deductible even if they move later, after more than one year, which is sometimes done, for instance, so that the children can finish their education at their old schools.

These are nondeductible moving expenses:

• travel for domestic help
• any losses incurred because of the move, such as club membership fees
• mortgage penalties
• forfeited tuition
• the cost of transporting new furniture bought while moving to the new place
• house-hunting trips undertaken to find a new residence
• temporary living expenses
• any expenses in selling the old residence or buying the new residence

Any expenses reimbursed by an employer are included in income.

Distance Test

To be deductible, this distance test, using the shortest distance using common routes, must be satisfied:

Old Home to New Job Location Distance − Old Home to Old Job Location Distance ≥ 50 Miles

If the taxpayer did not have a previous job, worked part-time, or was unemployed, then the new job location must be at least 50 miles from the old residence. The distance and time test need not be met by members of the Armed Forces if their move is to a permanent change of station (Form 3903 instructions). The moving expense deduction is also available to people moving from the United States or its possessions to a foreign country, or vice versa, and is also available to aliens who are not United States citizens.

39 Week Test for Employees

If the distance test is met, then an employee must also satisfy the 39 week test, which requires that the employee maintain a full-time job in the general area for at least 39 weeks in the 1^st year in the area. If the employee quits or is fired for willful misconduct, then the employee must get another full-time job to meet the 39 week test requirement. Mandatory retirement does not waive this requirement if retirement was anticipated. However, any temporary absence that was due to illness, strikes, shutouts, layoffs, or natural disasters is counted toward the 39 week requirement for full-time employment. The 39 week test does not apply if the taxpayer loses his job through no fault of his own, or becomes disabled or dies. Off-season weeks also account for seasonal work if the off-season period is less than 6 months and an employment agreement covers the off-season. The 39 week period is also satisfied if the employee is transferred out of the area for the employer's benefit, but it is not satisfied if the employee initiated the transfer.

For joint filers, either spouse individually must satisfy the 39 week requirement.

78 Week Test for the Self-Employed and Partners

The self-employed must work at least 78 weeks during the 2 years immediately after the arrival at the new location, and at least 39 weeks must be in the 1^st 12 months. The self-employed are considered to have the same employment if the self-employed set up shop so that work can begin.

If the employee becomes self-employed, then the 78-week test must be satisfied, but the time spent as an employee is counted toward the 78 weeks. However, if a self-employed person becomes an employee, then the taxpayer must work the full 39 weeks as an employee, and if it is not done within the 1^st 12 months, then the 78-week test must still be satisfied.

Joint filers can deduct moving expenses if either spouse satisfies the time test.

Claiming Deductible Moving Expenses

Form 3903, Moving Expenses is used to report unreimbursed moving expenses and employer reimbursements. If employer reimbursements exceed deductible moving expenses, then no deduction is allowed and the excess amount must be added to total employee compensation. This will be shown in Box 12, identified as Code P, on the employee's Form W-2, Wage and Tax Statement. Note that nondeductible moving expenses cannot be used in this calculation:

The moving expense deduction can be claimed even if the time tests have not been met. However, if the time tests are not subsequently satisfied, then the deduction must be claimed as income in the next tax year or an amended return must be filed. Alternatively, an amended return can be filed after the time test is completed to claim the deduction.

Generally, deductible moving expenses reimbursed by an employer under an accountable plan are not reported as salary or wages, nor are qualified moving expenses paid to a third-party such as a moving company. However, any reimbursements for expenses that are ordinarily not deductible, such as meal expenses, must be reported as compensation. Deductible expenses exceeding nontaxable reimbursements are reported on Form 3903. If reimbursement is received after claiming the deduction, then the reimbursements are reported as compensation. Claiming any deductions may be delayed until reimbursed by the employer, in which case, the total of the prior and current year deductions exceeding the nontaxable reimbursement may be claimed in the current tax year.