Moving Expenses Tax Deduction

Key Takeaways

• Taxpayers meeting certain criteria, such as active duty Armed Forces members moving per military orders, can claim a tax-deductible rate for moving mileage—22 cents per mile for 2024, excluding parking fees.
• Most taxpayers are ineligible to claim moving expenses due to the Tax Cuts and Jobs Act of 2017, with the exception of active duty Armed Forces members who may deduct moving expenses without meeting the time or distance tests.
• Active duty Armed Forces members can deduct moving expenses such as transport, storage of household goods, and personal effects using IRS Form 3903, and report it on Schedule 1 (Form 1040), while most other taxpayers cannot claim these costs due to changes in tax laws post-2017.

What is moving mileage?

The IRS defines moving mileage as the standard rate for using your vehicle to relocate to a new post. The standard mileage rate for moving expenses in 2024 is 21 cents per mile. This rate, however, can be subject to variations and may not always remain constant. It is important to note that parking fees don’t count toward claiming moving mileage.

A comparison of the current rates with those from previous years offers insight into the evolving landscape of tax deductions. While the rates vary, what remains constant is the opportunity for taxpayers to claim moving expenses as a deduction, provided you’re in the Armed Forces moving due to a military order.

To calculate your moving mileage, you need to monitor the distance covered during the relocation. This includes the distance from your old home to your new home, as well as any additional miles travelled for trips made to transport personal belongings or to complete other moving-related tasks.

Who can claim moving mileage?

As of 2017, only military service members relocating due to new orders can claim moving mileage deductions.

What moving expenses are deductible now?

Having established who can claim moving mileage, let’s explore the current deductible moving expenses. As per the tax laws for the year starting after 2017, the only individuals eligible to deduct moving expenses are active duty members of the Armed Forces who relocate due to a military order and a permanent change of station.

These eligible Armed Forces members can deduct costs associated with moving household goods and personal effects, transportation expenses, and storage costs. This makes it possible for them to alleviate some of the financial burdens associated with forced relocation.

Awareness of the limitations and restrictions on certain expenses, including deductible expenses, is essential. For instance, expenses provided by the government and expenses allocable to excluded foreign income are not deductible.

Furthermore, the Tax Cuts and Jobs Act of 2017 suspended the deduction for moving expenses for most taxpayers for tax years beginning after 2017. This means that unless you are a member of the Armed Forces on active duty and moving due to a military order, you are most likely unable to deduct your moving expenses.

That being said, you could still potentially recoup some of your moving costs in other ways. For instance, if your employer reimburses you for your moving expenses, that reimbursement might be excluded from your income, effectively giving you a tax benefit.

In essence, while the scope for deducting moving expenses has been narrowed, there are still avenues available to mitigate the costs of relocation.

How to claim moving mileage?

There are several key steps involved in claiming moving mileage on your tax return. The first step is to calculate the moving expense deduction for a move related to the start of work at a new post using IRS Form 3903. If you qualify to claim moving expenses for multiple moves, it is advisable to use a distinct Form 3903 for each move.

Once you’ve calculated the moving expense deduction using Form 3903, this amount should then be reported on Schedule 1 (Form 1040), line 14.

When completing IRS Form 1040, enter the actual moving expenses on line 1, excluding any moving services provided by the government. Then, reference the calculated deduction from Form 3903 on line 2. Keep in mind that itemized deductions are not applicable in this case.

Remember, to claim moving mileage, your deductions must be itemized. This means you’ll need to provide details of each expense you’re claiming, so be sure to keep comprehensive records of all your moving costs.

Which states still allow moving expense deductions?

Only seven states still allow moving expense deductions or exclude moving expenses from taxable income, including Pennsylvania, New York, Massachusetts, New Jersey, Arkansas, California, and Hawaii.

Summary

Understanding moving mileage and how to claim it on your tax return can potentially save you money, especially if you’re an active duty member of the armed forces. While the regulations have tightened in recent years, there remain opportunities for eligible individuals to claim moving expenses and reduce their tax burden. Stay informed, keep thorough records, and consult with a tax professional to ensure you’re making the most of your deductions.

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