Are Moving Expenses Still Deductible Under 2018 Tax Plan?
The 2018 tax plan has ushered in income-tax savings for many taxpayers. The federal government has reduced tax rates, raised the standard deduction, and increased child-care tax credits. It has also simplified the preparation needed for many returns. These savings and simplifications, however, have resulted in certain deductions being canceled. The cancellation of the personal exemption, home-equity loan interest, and tax-preparation fees have garnered much notice from taxpayers that use them. A lot of people overlook the cancellation of moving expenses. As of 2018, this popular deduction ceases.
The moving expense deduction has been popular because it requires no itemization. Taxpayers take the deduction on line 26 of their 1040, which means the expenses reduce adjusted gross income (AGI). Reducing AGI comes with many benefits, including qualifying for tax and other government benefits.
Taxpayers can still take the deduction in 2017. To qualify, you must have relocated for a job. The IRS requires the taxpayer’s move meet three tests.
Move related to start of work
A job change must primarily motivate the move. For example, an employee transferred across the country meets the test, though if the company picked up the expenses, they are not deductible. Taxpayers must incur the expenses themselves.
A taxpayer who moved for reasons unrelated to work, such as to live in a different school district, does not qualify for the deduction. However, if the employee wanted to move to a different area and changed jobs to make this happen, the employee likely qualifies because the move is still primarily motivated by the job change.
Taxpayers can consider expenses incurred up to a year after their moving date. For example, if they move and then incur expenses within a year for selling property or moving goods kept in storage.
The Distance Test
Your new job must be at least 50 miles further from your previous residence than your old job. Taxpayers who do not have previous employment must move at least 50 miles from their old home for the new job.
The Time Test
Employees must work full time in the new area for at least 39 weeks after their arrival. Self-employed workers must also meet this requirement. Self-employed workers may also use the standard of working at least 78 weeks of the 24 months after their arrival to the new area.
The deduction also helps members of the armed services. If they move as a result of a military order or permanent change of station, they qualify for the deduction, regardless of whether they meet the distance and time tests.
Taxpayers need to use form 3903 to figure their moving expenses. For specific eligibility questions, the IRS recommends publication 521, Moving Expenses.
The IRS specifically forbids deducting expenses for meals. Despite this, there are still plenty of move-related expenses available to help bring down your AGI for 2017. The moving expense deduction has been popular in today’s fluid job market, where millennials and even older workers are finding themselves changing jobs often. For 2018, many taxpayers are hoping they reap tax savings in other areas that make up for the moving expense deduction.