The Moving Expenses Tax Deduction

It used to be that if you relocated to start a new job or to seek work in another city, you could deduct some of your costs of moving. But that was then and this is now.

The Tax Cuts and Jobs Act that was passed in December 2017 eliminated this deduction. If there's any silver lining, it's that many of the provisions of the TCJA are not permanent. The moving expense deduction disappears from tax year 2018 through tax year 2025, but it's scheduled to come back at that time unless Congress intervenes to eliminate it permanently.

This time frame means that if you moved in 2017 and you qualify, you might still be able to claim the expenses on the tax return you'd file in April 2018. And, of course, if you move in 2026, you might be able to claim it then, too, if Congress allows the TCJA provision that eliminates it to sunset and expire.

In either case, here's what you need to know about taking advantage of the moving expenses deduction.

Not All Expenses Qualify

Qualifying expenses include costs for packing and shipping your household goods and personal property, and costs for travel and lodging. Meals aren't deductible as a moving expense.

It's an Adjustment to Income

Moving expenses are deducted "above the line" in the adjustments to income section on the first page of Form 1040. This means that you don't have to itemize in order to claim it. You can take this deduction in addition to claiming the standard deduction or itemizing your deductions.

Three tests determine who can claim the moving expenses deduction, and you must meet all of them.

The "Closely Related to Starting Work" Test

You must relocate within one year of the time you first report to work at your new job location. Let's say that Sally moves from Seattle to Austin on July 1. She starts working at her new job in Austin on November 1.

She started working within one year of the time she moved so she meets the "closely related to starting work" test.

This example also works if we reverse the time frame. Suppose that Sally begins working in Austin on April 1. She later moves all her furniture and belongings from Seattle to Austin on July 1. She still meets the "closely related to starting work" test because she moved within one year from the date she started working at her new location.

There's one exception to this rule. People who work outside the U.S. then retire and relocate back to the United States can deduct their moving expenses even though they're not starting work at a new location.

The Distance Test

Your new job location must be at least 50 miles farther from your former home than your old main job location was.

First, measure the distance from your previous residence to your new workplace. Let's call this measurement A. Now measure the distance from your previous residence to your old workplace. We'll call this measurement B. If A is at least 50 miles longer than B, the move satisfies the distance test.

Let's use Sally as an example again. She used to live and work in Seattle. Her commute from her home to her Seattle job was 10 miles when she lived there before relocating to Austin.

The distance from her previous home in Seattle to her new job location in Austin is about 2,100 miles. Because 2,100 miles is at least 50 miles farther than her old 10-mile commute, Sally's move meets the distance test.

There's an exception to this rule, too. Members of the military can deduct moving expenses even if they don't meet the distance test if they're on active duty and relocate because of a permanent change of station.

The Other Time Test

You must work at your new location long enough to satisfy a third test. You can satisfy this time test in one of two ways:

  • You work full-time as an employee for at least 39 weeks during the 12 months following your move, or

  • You work full-time as a self-employed person for at least 39 weeks during the first 12 months following your move and at least 78 weeks during the 24-month period following the move.

There are a few exceptions to this rule.

  • Members of the military on active duty who are relocating due to a permanent change of station are exempt.

  • People who work abroad then retire and relocate back to the U.S. are exempt.

  • Surviving spouses of persons who worked abroad and relocated back to the U.S. after their spouse's death are exempt.

  • People whose job at a new location ends because they became disabled or died are exempt.

  • People who are transferred to another location for their employer's benefit, and people who were laid off for any reason other than willful misconduct, don't have to meet this test.

Where to Claim the Deduction

Moving expenses are calculated and recorded on Form 3903 then entered on line 26 of the 2017 Form 1040.

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