moving expenses

Last Chance Tax Deduction in 2017 for Workers on the Move

Feb 21st 2018
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Have any of your clients pulled up stakes in the past year? If certain requirements are met, those individuals may deduct their job-related moving expenses “above the line” on their 2017 tax returns.

But this tax break is fleeting: Under the Tax Cuts and Jobs Act (TCJA), moving expenses are no longer deductible, except for active-duty military personnel, beginning in 2018.

Note that you can’t deduct any moving expenses if the reason for the move is personal. There’s no tax write-off for simply moving on up and out.

To qualify for the deduction for job-related moving expenses on a 2017 tax return, a taxpayer must pass a two-part test involving distance and time.

  1. Distance test: Your new job location must be at least 50 miles farther from your old home than your old job location was from your former home. The IRS uses the shortest of the most commonly traveled routes to measure the distance between the two points.
  2. Time test: If you’re an employee, you must work full-time for at least 39 weeks during the first 12 months after you arrive in the general area of the new job. But you don’t have to work for the same employer as long as the 39-week test is satisfied.

The time test is even stiffer if you’re self-employed. In this case, you must work full-time for (1) at least 39 weeks during the first 12 months and (2) a total of at least 78 weeks during the first 24 months after you arrive in the general area.

Assuming you pass the two-part test, you may write off the reasonable costs of moving your household goods and personal effects to your new home, as well as the travel expenses (including lodging, but not meals) between the two locations.

Normally, this will include charges by a moving company or a truck rental.

For this purpose, “reasonable costs” include expenses of traveling directly from one location to the other. But costs attributable to any side trips for sightseeing aren’t deductible.

If you travel by car, you may deduct the actual expenses for the move, as long as you keep all the necessary records, or use an IRS-approved flat rate. The flat rate for a job-related move in 2017 is 17 cents per mile (plus tolls and parking fees). For active-duty personnel still eligible for a deduction in 2018, the flat rate increases to 18 cents per mile.

Be aware that certain “indirect costs” of moving — such as meals, househunting trips, temporary living expenses and attorney’s fees and real estate commissions related to the move — are not deductible at all.

However, the deduction is generally available for qualified expenses of moving yourself, your spouse (if married) and other members of your household, such as dependent children. A “member of your household” must reside in both the old and new homes.

The TCJA also eliminates the tax exclusion for moving expense reimbursements, except for active duty military personnel, beginning in 2018. Therefore, you can’t simply circumvent the new law crackdown on job-related moving expenses through company reimbursements. Bottom line: The effective cost of moving for a new job is going up.  

This article is part of a series titled Vintage 2017 Tax Deductions, which focuses on the key deductions your clients may be able to claim under the new tax law.

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