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How to Deduct Moving Expenses From Your Taxes

Sometimes, life requires a change. This can come in many forms, like a new house, job or a new city. Deciding to relocate for work is an exciting adventure, but it also comes with a long to-do list, and it can be costly. One pressing question many people have is "Are moving expenses tax deductible in 2024?" Until recently, relocating for work was more affordable thanks to the Internal Revenue Service's (IRS) moving tax deduction. In 2018, the IRS changed and updated a whole list of tax policies. One change did away with the moving expenses tax deduction, but certain states still permit the deduction on state tax returns. You may still qualify for the moving expense deduction 2023 and be able to take advantage of other tax deductions like groceries, vehicle mileage and health insurance.

Key takeaways

Moving expenses were always deductible in the past
Some states still allow you to claim moving expenses on state tax returns
When it comes to taking business deductions, you can choose either the standard deduction or itemized deductions

Table of contents

Are moving expenses tax deductible?...Read more

IRS moving expenses 2023 for the Armed Forces...Read more

Moving before the 2018 tax reform...Read more

What are moving expenses?...Read more

What moving expenses are tax deductible in certain states?...Read more

Tips to save on moving expenses...Read more

What expenses are tax deductible?...Read more

Are moving expenses tax deductible?

Sadly, they are not. In 2018, the Tax Cuts and Jobs Act changed the rules, and most people don’t qualify for the moving expense deduction anymore. A company can still choose to offer a moving allowance to reimburse their employee for moving costs using the company’s income. The company can deduct the cost from its taxes once it pays the employee for the moving expenses. Reimbursements from an employer, like moving expenses, are considered fringe benefits. Fringe benefits refer to any taxable income, including tips, commissions, bonuses, wages and other perks. Since these perks are taxable, they’re included in federal income tax withholding, federal unemployment taxes and FICA (Social Security & Medicare) taxes.

IRS moving expenses 2023 for the Armed Forces

If you’re an active Armed Forces member, you still qualify for the moving deduction since you’re required to relocate due to a permanent change of assignment. Your moving expenses can be claimed on Form 3903, regardless of employment requirements or the distance of the move. For example, your moving deductions are deductible if you are relocating from the military due to retirement or the end of your service.

Moving before the 2018 tax reform

Any move completed before the 2018 tax form needed to meet the distance and qualifying time test to qualify for deducting moving costs. To pass the distance test, your new job needs to be at least 50 miles more than the distance between your old home and your job. For example, if you worked for an accounting firm, and it was 20 miles from your home, your new job needs to be at least 70 miles from your old home. Your move has to have occurred around the time you started your new job, and you have to work at your new job for at least 39 weeks following the move. If you were self-employed before 2018, you could also have filed Form 3903. The requirements were more intense because you not only needed to work at your new job for 39 weeks in the first year following the move, you also had to work 78 weeks in the second year.

What are moving expenses?

For moving expenses to be deductible before 2018, they needed to be both reasonable and necessary for your move. Those expenses included:

Boxes, tape and markers
Airfare
Freight or shipping costs
Movers
Moving van rental

When it came to moving expenses, only some things were considered deductible and other items were not deductible.

Image listing expenses related to moving and renting a house including penalties, broker fees, mortgage penalties, and house hunting expenses. No mention of self-employment, 1099, freelancer, or taxes.

What moving expenses are tax deductible in certain states?

Some states follow the IRS’ updates and adapt their tax laws accordingly. Others do their own thing and set their own rules. With the change to the moving expenses tax deduction, only seven states allow moving deductions or exclude moving expenses from taxable income:

Pennsylvania
New York
Massachusetts
New Jersey
Arkansas
California
Hawaii

The rules vary from state to state. For example, Virginia allowed the deduction until recently. You can use a tax deduction calculator to find eligible write-offs in your state. California and New York still allow a moving expense deduction and exclude employer reimbursement as taxable income.

Tips to save on moving expenses

Moving is expensive, and the costs can accumulate quickly. With the right tips and advance planning, you can save a lot of money on your move.

What expenses are tax deductible?

With rising costs and high inflation, you might be looking for ways to save on taxes now more than ever. Deductions can help reduce your self-employment tax bill by lowering your taxable income. This is especially useful if you have to make estimated tax payments every quarter. When it comes to deductions, you can take the standard deduction or itemize your deductions. It’s up to you to decide which will save you the most money. The standard deduction is the most common option and is a specific dollar amount set by the IRS.

Image displays standard deduction rates for 2022 and 2023 for different filing statuses like single, married, filing jointly, separately, and head of household. No mention of self-employed, 1099, freelancer, or taxes.

When choosing the standard deduction option, there are a few things to keep in mind. You can’t deduct charitable contributions, health insurance premiums or home mortgage interest. Deducting these expenses is only possible when you choose to itemize deductions. If you choose to itemize deductions, you’ll need to keep track of your expenses using receipts or bank statements. You’ll calculate your deductions on Schedule A and record the total on Form 1040. If you use FlyFin, A.I. will do all the work and find all your deductions. CPAs offer unlimited 1099 tax support on the app including preparing and filing tax returns.

Image listing common itemized deductions for freelancers including vehicle expenses, business meals, travel, education, health insurance premiums, and charitable contributions. Relevant for self-employed, 1099, and tax purposes.

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.