Your guide to moving expense tax deduction

Your guide to moving expense tax deduction

In this start, the moving expenses associated with relocation to a new city for a job hunt or opportunity were tax deductible. However, it was later amended and the Tax Cuts and Jobs Act (TCJA) struck off the deductions from the tax code for the majority of the taxpayers. The change was put into effect in the tax year 2019 the deduction is now only available for members of the Armed Forces as a Schedule 1 deduction—”above the line.” The deduction is a key factor in calculating the Adjusted Gross Income.

iMoving.com, a prestigious portal to search the best moving companies state that moving expense deductions are often very ambiguous. Especially after the change, the situation has become more complex, making most of the army personnel confused, whether or not they would be offered a deduction in the taxes or not?

Eligibility criteria for Military members:

Om vase you are an active army person and have changed your location permanently, you can easily claim for any tax deductions based on moving expenses incurred in the year tax year 2018. The moving expenses deduction can be claimed for a range of expenses including movement from home to the first posting, from one post to another, current post to home or anywhere closer to the United States of America.

It is also noteworthy that the moving expense deductions can only be demanded on the expenses that aren’t reimbursed by the government already. A personnel can only claim these deductions within a year if one is moving because their duty is ending as an Army personnel. The taxation law actively covers the moving expenses of your family when they are moving with you. If, in case, you have died, deserted at the post or captured by the enemy, your family and dependent can claim the moving expenses deduction while moving alone.

The inclusions in the deductible moving expenses are cost associated with moving of the inventory and the lodging charges. The cost of meals during the route cannot be incorporated. Finally, you must ensure that the moving expense you are including for the deduction is a sensible amount. 

The exclusions of moving expense deductions:

In case you decide a change of route and travel a few extra miles instead of taking a direct route, you cannot include the cost of the extra miles in the deductible expense. If you further deviate from the route and take stoppage for sightseeing or any other personal favors, you cannot include it to the deductions as you would be extending the expected time to reach.

Some more expenses that cannot be included in the list of moving expense deduction inclusions are:
   

•    The money spent in buying or selling a new house along with the purchase price of the property.
   

•    Cost of the lease
   

•    Any security deposits made to the property manager or owner.
    •    Cost of new vehicle registration and new driver’s license in the new location
   

•    Cost of renting a storage facility post movement. This can be an inclusion in case of movement to a foreign country.

What is the rule for the common man?

Moving expenses deductions, before 2018, were very elaborating including costs for packing, shipping, or storage unit for temp storage of personal belongings and home inventory. The cost of travel and accommodation was also a part of the deduction claim. Much like the rules for the military personnel, others can also not include the cost of sightseeing and any route deviation to the deductible amount.

There are three key requisites, qualifying which you can claim for the moving tax deductions:

The “Closely Related to Starting Work” Test
It is important that you relocate within one year of reporting to your work or at the new job location. You must meet the “closely related to starting work” test and must relocate within one year, before or after, joining a job.

The Distance Test:

It is imperative that the new job location must be a minimum of 50 miles farther from your previous address of residence than your previous job location was. Simply put, there are individuals who commute a fair distance every day to reach their job site. If in case you are one of them and now you are relocating to a new place but the distance is equivalent to the distances you were already travelling, you cannot claim for the moving expense deductible.

Another Time Test

This is as the name suggests, you need to spend time on the new job and this condition can be fulfilled in two ways:
    •    By working as a fulltime employee for a minimum of 39 weeks in the next 12 months after the move, or
    •    By working as a full-time self-employed person for a minimum 39 in the following 12 months after the move or at least 78 weeks during the following 24 weeks after the move.
Some exception to the time test rule are:
    •    People who were working abroad and relocating to US post retirement are exempted.
    •    Spouses of a deceased who were working abroad and now relocating to the US.
    •    Any individual who lost the job due to a disability.
    •    Employees who were laid off as well as employees who were transferred for the employer’s benefit.

Author Bio – Sunil Kumar Is a Passionate Blogger, Seo Expert and Digital Marketer, Certified Computer Security Researcher and Penetration Tester.