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Moving expenses deduction for 2020-2021
Active duty Armed Forces members may be able to deduct moving costs, including travel expenses.
Due to the Tax Cuts and Jobs Act of 2017, nonmilitary taxpayers can no longer deduct moving expenses. This deduction is now exclusively for qualified members of the military. Here’s what you need to know about who is eligible and what expenses can help lower your tax bill.
What's in this guide?
- What is the moving expenses deduction?
- Who qualifies for the moving expenses deduction?
- How much is the moving expenses deduction worth for 2020?
- Which types of expenses qualify for the moving expenses deduction?
- How to claim the moving expenses deduction
- Related tax credits or deductions
- Bottom line
What is the moving expenses deduction?
The moving expenses deduction is an adjustment to your income when you’ve shelled out money for unreimbursed expenses because of a military order and permanent change of station. You can deduct the costs incurred for you, your spouse and your children during the relocation process — including storage and travel expenses — to get to your new home.
Who qualifies for the moving expenses deduction?
Before the Tax Cuts and Jobs Act of 2017, taxpayers could use the moving expenses deduction to relocate for a new job or if their current job was moved to a new location. But for tax years after 2017, only specific Armed Forces members can qualify. To be eligible, you’ll need to meet these requirements:
Forces members can qualify. To be eligible, you’ll need to meet these requirements:
- An active duty member of the Armed Forces
- A spouse or dependent of an Armed Forces member who deserts, is imprisoned or has died
- A US citizen or resident alien if the new place is outside the US
- Received a permanent change of station
The IRS has a handy, interactive questionnaire that can help you determine if you can deduct your moving expenses. The entire interview takes approximately 10 minutes to complete, and you’ll need some information such as how much you’ve spent on the move and if you’ve received any government reimbursements.
What is a permanent change of station?
A permanent change of station is an assignment of transfer to a new post. This may include:
- A move from your home to your first active duty station
- A transfer from one permanent post to another
- A move from your last permanent station to your home or somewhere closer to your home in the US. The move must occur within one year of your active duty ending or the time allowed under the Department of Defense’s Joint Travel Regulations.
How much is the moving expenses deduction worth for 2020?
There is no dollar cap to how much you can deduct. But you can’t deduct expenses that the government pays or reimburses you for through an allowance that you don’t include as part of your income. There may also be limits to what expenses qualify for the deduction.
Which types of expenses qualify for the moving expenses deduction?
Here are four main expenses that qualify for the deduction.
- Moving supplies
- Foreign move
You can deduct the equipment and materials that you use to relocate your possessions. For example, if you bought packing supplies or moving insurance, the costs are deductible.
The deduction also covers the cost of storing your household goods for 30 consecutive days while the items are being moved from your old to new home.
Traveling expenses are deductible within reason. For example, airfare, car expenses, and lodging all qualify. If you traveled by car, you can deduct what you paid for fuel or take the standard mileage deduction rate of $0.17 per mile. And you can add in any out-of-pocket parking fees and tolls.
While the IRS doesn’t specify what they constitute as “lavish and extravagant lodging,” its tax guide states that you can’t deduct luxurious hotel stays. And you can forget about deducting expenses for sightseeing and side trips during your move.
Although you can deduct a move from the US to a foreign country or from one foreign country to another, you can’t deduct expenses if you move from a foreign country back to the US.
How to claim the moving expenses deduction
Use IRS Form 3903 Moving Expenses to figure out your moving expenses deduction. Attach this form to your income tax form when you file your tax return.
Use this step-by-step guide to complete Form 3903:
- Enter your full legal name and Social Security number.
- Check the box to certify that you’ve read the instructions and qualify for the Moving expenses deduction.
- Enter the cost to transport and store your belongings in line 1.
- Fill in your travel costs in line 2.
- Add the total of lines 1 and 2 in line 3. This is your total expenses.
- Input the amount the government has paid you for your moving expenses that’s not included in your income.
- Check No if line 3 is less than line 4. If line 3 is more than line 4, check Yes.
- Subtract line 4 from line 3 in line 5. This is your moving expenses deduction.
Related tax credits or deductions
If you qualify for the Moving expenses deduction, you may be eligible to claim the following tax breaks too:
- Combat pay exclusion. If you serve or support a combat zone, your combat pay may be partially or entirely tax-free.
- Uniform deduction. You may be able to deduct the costs of uniforms that you can’t wear while off duty.
- EITC. If you receive nontaxable combat pay and include it in your taxable income, you may increase your Earned Income Tax Credit (EITC) and potentially get a larger refund.
If you’re a member of the Armed Forces and got a new post of duty, you may be able to deduct almost all of your moving expenses. But you can’t include any costs reimbursed or directly paid for by the government that isn’t included in your income.
To claim this deduction, you’ll need to fill out some paperwork. Most tax preparation software packages can help calculate your Moving Expenses deduction for you. Consider hiring a professional or compare a few online services to help file your next tax return.
- About Form 3903, Moving Expenses, IRS.gov, March 24, 2021
- Topic No. 455 Moving Expenses for Members of the Armed Forces, IRS.gov, March 12, 2021
- Armed Forces’ Tax Guide, IRS.gov, February 11, 2021
- Can I Deduct My Moving Expenses?, IRS.gov, October 23, 2020
- Subchapter C – Permanent Change of Station (PCS) Allowances for Subsistence and Transportation Expenses, US General Services Administration, January 29, 2021
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