The Wheaton Blog
How the Tax Cuts and Jobs Act Affects Moving-Related Tax Deductions
If you’ve ever relocated to a new home for a job, you may have been able to deduct your qualified moving expenses. If you plan to move this year, you should know that most moving-related tax deductions and exemptions are no longer yours to claim.
The passage of the Tax Cuts and Jobs Act (TCJA) removed the deductions from the code for nearly every private taxpayer. There are big changes in the 2018 version of IRS code relating to relocation reimbursement, exclusions, and deductions. Here are some of the details.
Employer Relocation Benefits Are Now Taxable
In the former tax code, you could exclude employer relocation assistance from your income. Whether your boss paid in advance for your move to a new location or you were reimbursed by your employer for moving expenses, you didn’t have to count those qualifying funds as income.
Now, your employer must report the financial assistance you receive for a relocation. From the year 2018 until 2025, any move you make with corporate or employer assistance will essentially raise your gross income. If your employer covers the costs of any of the following services related to a new-job relocation, you and your employer must report the cost of the service as pay:
- Hotel rooms and lodging
- Airfare to new destination
- Mileage reimbursement
- Shipment of vehicles
- Storage of household furnishings
If you think this may happen to you, ask your boss about raising your pay to help cover the cost of the extra move-related taxes. Some employers may end up curtailing their relocation programs due to the tax changes. Companies that depend on a flexible, mobile workforce will be willing to help their employees move without causing the employees additional financial penalties.
Certain active-duty members of the armed forces are the only taxpayers allowed to exempt their qualified relocation expenses from their income. The move must be related to a new active duty post, and other move-related restrictions still apply. The good news for military members who do qualify for exclusions is that the federal mileage reimbursement is being raised from $0.17 per mile to $0.18 per mile.
Expect many states to change their tax codes to reflect the TCJA rules and federal regulations. Don’t count on getting a break on your state income taxes, either. Unless you’re in the military, you must claim financial assistance as income when your employer is the source of that assistance.
Deductions for Moving Expenses Have Been Suspended Until 2025
Like the income-exemption rules, former rules for deducting out-of-pocket moving expenses have been suspended until the year 2025. You may no longer deduct job-related moving expenses from your gross income, even when you paid for the move yourself.
This means you can’t deduct the following expenses:
- Packing of furnishings and personal effects
- Shipping of household goods
- Gas and oil for vehicle relocation
- Lodging in old location
- Lodging during move
- Connection and disconnection of utilities
Rather than deducting these expenses from your gross income as in the past, you must now pay taxes on the amount you spent for your move. Because of the tax changes, you should rethink some of your moving strategies in order to save money to pay your higher taxes.
Do you plan to ship your vehicle to your new location? Do you also plan to have a professional pet relocation service deliver your pets to your new home? Consider the total fees for both of these services, especially knowing that the costs don’t qualify as tax deductions. Have a family member or friend drive your car and your pets to the new location instead.
Expenses for Moves Made in 2017 Are Still Deductible
People who relocated for job-related reasons in 2017 may claim the moving expense deduction on their 2017 tax returns. The move must be related to the start of a new job. The place where you move and the time frame when you move must correspond with the location and start date of new employment.
There are several tests you must meet to ensure the move and the new job are related. A distance test allows deductions for moving expenses when your new job location is at least 50 miles farther from your old residence than the location of your last job.
A time test mandates that moving deductions are only allowed if you work a specific number of weeks within a year or two of your relocation. You don’t have to work at the same employer for all of the weeks. There are additional tests and rules to claim the deduction for your 2017 move.
Check with your tax accountant or attorney to find out how you can claim the moving-expense deduction if you moved in 2017. If you must move again in 2018, at least you can get some benefit from the old rules.
The relocation professionals at Wheaton World Wide Moving help families across the U.S. and abroad manage their moves and their moving expenses. Contact us today to learn more about our relocation services for individuals, families, government staff, corporate employees, and military members.