How to claim moving expenses
Moving to a new place can’t be done without a lot of expenses and hard work. The silver lining is that you can get a big tax break. So, why not take advantage of this opportunity? The only things standing between you and your tax break are the ever-changing rules and requirements. Even if you are not allowed to claim moving expenses, there are some things you can do to save a few bucks on the move. Doing most of the work yourself or hiring affordable professional NJ movers are some of them. Whatever the case, it is important to stay informed and play your cards well, especially if you’re moving on a tight budget.
Recent changes worth mentioning
Until 2018, taxpayers were allowed to deduct moving expenses from the taxable income they reported on Form 1040. However, things have changed. In December 2017, the Tax Cuts and Jobs Act was passed which eliminated this deduction. On the bright side, many of the provisions of the TCJA aren’t permanent. Unless Congress wants to eliminate it permanently, the moving cost deduction will come back after 2025.
So, if you decide to relocate in 2026, you may be able to claim moving expenses on the tax return then. Since the deduction of moving costs is not subject to any limits, you will be able to claim all of your qualified moving expenses, provided that they are eligible for deduction. The costs that your employer reimburses you for are not deductible, unlike the costs you pay from your own pocket.
Requirements to meet before you claim moving expenses
Here are a few things you should take into consideration:
- The reason for the move has to be work-related
- Meeting a distance test
- Meeting the time test
- Itemizing to claim the deduction
- The exceptions to the rules for claiming moving expenses (for the military, survivors, retirees)
The reason for moving
The reason behind your decision to move has to be closely related to employment in a new location. This means you cannot expect to qualify for the tax deduction if you are moving to be closer to a family member or you simply want a change of scenery.
You can’t claim moving expenses unless your new job is at least 50 miles farther away from your former home than your previous job was. For instance, if your old job was located 5 miles from your old home, your new job has to be at least 55 miles away from your old home.
To claim moving expenses, the timing of your relocation has to be close to the start of your new job. In other words, it is required that you move within 12 months after the date you first report to work at your new job. It also works the other way around – you should start working within a year after you move. Additionally, you must start working and work full-time for a minimum of 39 weeks within the first year after the move in order to meet this requirement.
There is an exception for moving long after the first day of work. In case you begin to work months before your family members relocate, you can still deduct your moving expenses but only under special circumstances. For example, if your husband/wife has a health issue or your child needs to finish school before the move. Also, if you retire and move back to the US after working outside the country, you can claim moving expenses although you are not beginning to work at a new location. Members of the US armed forces who move because of a military order don’t have to meet the time and distance tests.
What is deductible as a moving expense
You can only claim the costs that are necessary and reasonable. Not every expense counts as a moving expense you can claim. Moving costs include the cost of packing and shipping your belongings, short-term storage, the costs of travel, the costs of gas and rental trucks, lodging in case of long-distance moves, special moving services NJ such as pet transportation, etc. On the other hand, things like meals, car registrations and licenses, house-hunting expenses and security deposits do not qualify as moving expenses.
Completing the form for claiming moving expenses
Normally, you must file Form 3903 to claim your moving expenses. Shipping and storage costs belong to line 1 of this form. Line 2 is for travel, lodging, and gas costs. Line 4 is for reimbursements from the employer for any moving costs. A tax software or a tax professional will guide you through the process when doing your returns. Furthermore, you will have to itemize your deductions on your tax return. Although you may have to spend more time preparing your taxes, it could lead to a lower tax bill if this and other deductions exceed the standard deduction.
Affordable movers save your money, too
Due to recent changes, you probably won’t be able to claim moving expenses for a few years. However, there are many ways to make your move less expensive. Finding a moving company in New Jersey that does not overcharge is as good as a huge moving cost deduction. Find out which NJ moving companies people generally recommend and get a free moving quote from each of them. Pick the one that offers the best balance between quality and price. Only a binding estimate guarantees that there will be no surprise costs at the end.
Do your research and find NJ movers who offer discounts you could be eligible for. Moreover, movers have different rates for different times of the year, month and week – get the lowest ones. Finally, try to get free packing supplies and do as much as you can without professional help in order to reduce moving costs.