Often times, when you are planning your moving, one question arises. Are moving expenses taxable? Due to the changes in 2017-2018, many people are still confused. If you moved for work prior to 2018, some of your expenses were tax-deductible. However, the new law that will remain in effect until 2025 is suspending large portions of tax-deductible options. In general, you should check with a qualified tax accountant about tax-deductible moving expenses.
Are all moving expenses taxable?
Because of the Tax Cuts and Jobs Act, it’s no longer allowed to deduct moving expenses until 2025. However, there is a couple of exceptions where you are still able to do so. Military members, as well as some other people, will be able to deduct a portion of their expenses within certain conditions.
Military members and others
If you are still on active duty and you need to change your location you will be able to deduct some of the expenses. Usually, this includes the relocation of your household possessions and additional costs of lodging. If there are any. Generally, this is due to the fact that military personnel often change their base stations because of the nature of the job.
On the other side, there is a specific group of people who are allowed to have the same privilege. This includes family members of a person who worked abroad, people who move back to the US for retirement, and people who are unable to work anymore due to disabilities.
Deduction criteria for workers prior to 2018
If you are moving because of work, it is possible to be eligible for reimbursement. However, because of IRS regulations, your expenses are taxable. Up to 2018, shipping, packing, storage options, and travel costs were excluded from taxation. But, there are criteria that need to be fulfilled before doing so:
- The time frame of move – you need to begin working your new job within a year from moving.
- The length of a job – you will have to work for at least 39 weeks within the first year after moving.
- New job distance – you are moving at least 50 miles away from your previous residence.
Expenses that are not deductible
The next couple of thing are not tax-deductible by any means, so consider them when planning your moving budget:
- Meals during relocation are not deductible
- The costs for a temporary residence before moving to a permanent home.
- Upgrades and renovations of your new place.
- Deposits for acquiring your new lease
Are moving expenses taxable? Yes, but you can still benefit
If living in an expensive city like NYC is too much for you, you can think about moving to another place. In general, you are going to pay taxes when moving, but you can still benefit because of the tax differences between states. For example, New Jersey has the same federal and payroll taxes. But, you will get credit for taxes you already paid in NY. Of course, it is not a 1:1 ratio, but somewhere about 1:0.9 is good enough. Furthermore, you will be saving five figures every year. This is something worth thinking about when planning your move.
Arguably, a lot of people are not thinking about these things when planning to move. Are moving expenses taxable? Yes. But there are many other ways to reduce the costs and to have a budget-friendly move. At first sight, taxes are similar in many states. However, there is a considerable amount of money people pay for various taxes, so it’s worth checking out.