Moving Expenses Deduction – All You Should Know

Relocating cross-country will undoubtedly cost quite a bit. If you’re planning a move, you will be looking for ways to cut a fee or two. Moving expenses deduction used to be the best way to save up. However, the rules have changed. Now, the IRS doesn’t consider every work-related move tax-deductible. There are some exceptions to this regulation.

September 22, 2020 Posted in Moving Tips / By Amber Hughes

So, if you plan to change your address and you’re in search of a new home, pay close attention to see whether you’re eligible for certain returns and benefits. If not, check out our bonus tips on saving up when relocating.

Are Moving Expenses Tax Deductible?

According to Statista, 55% of Americans move for housing reasons and employment opportunities. And the vast majority of them will look for the cheapest way to move out of state. These affordable ways to move used to be largely connected to certain benefits allowed by the government. However, now only specific groups of people fall under the category of those who can deduct their expenditures and get a return on their federal income taxes.

Military personnel can still be eligible for these reliefs. As for the rest, there is still a possibility to apply for it if you moved before the end of 2017 when the new regulations were adopted. If you’re wondering – can I claim moving expenses on my taxes? be sure to gather the right information.

Long-Distance Moving Expenses Tax Deduction Before the Reform

Before the IRS set the new rules in 2018, those who moved for work and were regular taxpayers had multiple benefits. The time and distance requirements were the main factors to classify a move as job-related. If these parameters were met, people were able to get federal income taxes deducted. The cost of the majority of standard long-distance moving services was deductible:

In addition, people were entitled to a tax return for transferring and setting up utilities after the move, temporary lodging, gasoline, oil, parking, and other move-related expenditures. However, most taxpayers aren’t eligible for these refunds nowadays. The IRS doesn’t allow work-related moves to be reimbursed on the state’s account.

cross-country moving tax deduction
The reform of 2018 has changed the rules, and now only specific categories of people are eligible for a refund given by the state.

Military Moves Still Include Moving Expenses Deduction for Active Members

Although most regular taxpayers have lost the right to a tax return from the federal income, the military is an exception to the rule. The new law’s implied suspension of deductible relocation charges does not affect the US Armed Forces members on active duty. Those who move under the military order for PCS will still enjoy these financial advantages. According to the IRS, their costs would qualify for a write-off if the government didn’t compensate for the expense.

soldiers long-distance moving for work
Military moves are an exception to more strict rules, and they qualify for the benefits granted to deduct the relocation expense.

Can I Deduct Moving Expenses in 2021?

The IRS dismissed many deductions from January 1, 2018. Relocation expense deduction was one of them, except for the members of the military. However, your taxes might still be deductible if you moved before December 31, 2017. If you haven’t claimed those benefits yet, it might be worth checking up on your cost return. According to the IRS, you can ask for a return and change it for three years after filing it or two years after paying the tax. You might still be on time for the refund – so grab your agenda and calculator.

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Can I Deduct Moving Expenses if My Employer Reimburses Me?

The new Tax Cuts and Jobs Act made all relocation costs taxable for employees. However, the employer can help out. Regardless of whether you got a new job or are being assigned to another office location, don’t forget to ask your employer if they plan to pay for your relocation or a part of it. It’s not rare for a business to offer a comprehensive relocation package to an employee to attract them and talk them into taking the job. But to be completely sure, put this on your list of relocation questions to ask the employer.

calculator for a tax deduction
Discuss the relocation with your employer and see whether you can get some financial help.

Which States Allow Moving Expense Deduction?

Deciding where to move is always a huge step that requires careful consideration and meticulous research. Choosing the right state and picking a city to live in should be based on several key points, starting from affordability, job market, and safety of the neighborhood you chose. Nevertheless, selecting a location now also plays a role in whether you’ll be able to deduct taxes due to a relocation.

The list of states that still allow write-offs includes:

  • Hawaii
  • Pennsylvania
  • California
  • New York
  • New Jersey
  • Arkansas
  • Massachusetts.

Right now, only these seven states allow a relocation tax deduction.

What Can You Write off for Moving Expenses?

Following the proven relocation tips will unquestionably help you reduce the costs and have a smooth transition. Still, since only seven states still allow employees to deduct their business-related relocations, you will have to look carefully at other ways to save up or file for the return if you moved before the end of 2017.

You could write off relocation, packing, car shipping, and storage services. In addition, all expenditures that are directly related to the move can be reduced as well. However, the list doesn’t include meals and rest stops along the way, nor does it allow you to deduct the cost of the things you’ll buy to furnish the new home.

Are Moving Expenses Itemized Deductions?

If you fall under any of the categories eligible for tax return deduction, you don’t need to itemize. If you moved for work, you must be employed full time. Also, your new place needs to be at least 50 miles away from the place where you used to live. Lastly, you must be employed for at least 39 weeks during the first year after you arrive.

white folders
If you qualify for these benefits, learn more about them and file a form.

How to Save Money to Move Without Deducting Taxes?

Although the answer to the question Can I deduct moving expenses on my taxes is a bit discouraging these days, there are numerous other ways to save on relocation costs. These are the things you can do to cut down the relocation cost:

  • Declutter your home and get rid of unwanted goods,
  • Choose the best time to move and avoid the busy season,
  • Hire the most reliable cross-country movers within your price range,
  • Save up by using free boxes and cheap packing supplies,
  • Make lists and start to prepare for the move three months in advance.

That way, although you might not be eligible for a tax return and able to write off every expense, you will be in a better financial situation, and the whole process will be simpler and less stressful.

Selling and Donating Unwanted Items

Donating clothes to the homeless or looking for a place to donate toys you no longer need isn’t only a noble act. It also helps you lower the overall relocation costs. How so? When you get a free quote from the long-distance movers you’re planning to hire, there will be a questionnaire to fill out. The estimated price range will be based on the inventory of your belongings. Leaving behind, selling, tossing, recycling, or giving away some of the stuff you will no longer use will lower the final price.

You can also donate old books or furniture – which is possibly the best cost-cutting solution. Getting rid of bulky items is an excellent way to save up, reduce the time needed to get packed and load the truck, and gain more space. Look up charity organizations near you or contact the Salvation Army to learn more.

Another way to strengthen your finances is by organizing a garage sale. Start by sorting the stuff you’d like to sell and getting tables to display them correctly. Then, make sure to advertise the sale and select the best possible time and date – which is usually the weekend. Lastly, research the pricing to come up with great deals for buyers without losing profit.

Check out the video below to learn how to organize a garage sale:

Get Free Boxes and Supplies

Before you start to pack, you should find the right types of packing materials. You will need to get your hands on best-sized boxes, paper, bubble wrap, plastic bags and wrap, duct tape, and labeling markers. Don’t have the slightest shadow of a doubt – markers (and labels) are essential. Making a labeling system will help you throughout the whole process, including after the relocation, when you will be in charge of the unpacking process.

Here’s how you can deal with this expense:

  • Get free boxes from the local store or rent them instead of buying,
  • Calculate precisely how much materials you’ll need,
  • Use what you already have and be creative with old shirts, socks, and garbage bags,
  • Visit the dollar store and find some supplies there.

By doing so, you’ll preserve a certain part of your budget and pack easily.

Hiring the Best Cross-Country Movers

So, how much do long-distance movers cost? The answer depends on multiple factors. Firstly, there are the matters of quantity and complexity of the move. For instance, the long-distance movers cost for a one-bedroom apartment is substantially lower than for relocating a spacious mansion.

Ultimately, avoid unnecessary financial strain by learning to spot the red flags and recognize relocation scams:

  • Find relevant information on the company’s website,
  • Run a background check and see if there have been name changes,
  • Look at the reviews and testimonials,
  • Ask for a sample contract,
  • Learn how they calculate the costs.

A USDOT number check is also essential if you want to lower the risk of fraud and prevent unnecessary money loss. Look it up on the company’s website and run it through the FMCSA database.

long-distance movers
Whether you’re relocating for business reasons or housing, it’s paramount to hire the most reliable cross-country movers.

Are You Planning to Move?

Regardless of your income, current financial situation, and personal reasons to move, thorough planning and reducing costs should be on your list of priorities. If you’re not eligible for a refund provided by the government, there are still excellent ways to stay in control of your finances. From getting free packing materials to selecting the right date for your move, there’s a whole range of actions to take in order to save some money.

Most importantly, if you choose to hire professional cross-country movers to help you out, you will need to conduct a pretty extensive search. By doing so, you will be sure to move efficiently, quickly, with less stress, and with no additional costs related to damage, losses, or fraud. Start your research on time and do everything in your power to lower the final bill.

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