Did you recently move for a new job, or are you thinking about doing so? In 2019, over 12% of the 32 million people who moved did so for work, according to the U.S. Census Bureau. If you’re part of this group, you might be wondering if you can deduct your moving expenses from your taxes. Unfortunately, the Tax Cuts and Jobs Act (TCJA) of 2017 made it so most people can’t deduct these expenses. However, some taxpayers can still do this, and there are other ways to offset moving costs.
How you offset your expenses depends on whether you’re filing under the old or new rules.
Under the old rules, for 2017 and earlier, you could deduct moving expenses if they were related to the start of work, met a distance test, and a time test. The move had to be related to the start of work both in time and place. If you moved within a year of starting work, the expenses were generally considered related in time. The expenses were related in place if your new home was not farther from your new job than your old home was from your new job.
The distance test required your new job to be at least 50 miles farther from your old home than your old job was. If you didn’t have a job, the new job had to be at least 50 miles from your old home.
The time test was different for employees and self-employed people. If you were an employee, you had to work full-time for 39 weeks in the first 12 months after you moved. If you were self-employed, you had to work 39 weeks in the first 12 months and 78 weeks in the first 24 months after you moved.
There were exceptions to the time test, such as if you moved to the U.S. because you retired from a job outside the U.S., or if you moved because of a permanent change of station in the U.S. armed forces.
If you met these tests, you could deduct expenses like moving your household goods and personal effects, connecting or disconnecting utilities, shipping your car or pet, and traveling to your new home. However, if your employer reimbursed any of these expenses and didn’t include the reimbursement as taxable income on your W-2, you couldn’t deduct those expenses on your return.
Under the new rules, the TCJA suspended moving expense deductions for tax years 2018 through 2025 for all nonmilitary taxpayers. Active-duty military members who move due to a permanent change of duty station can still deduct moving expenses.
If you qualify, you can use Form 3903 to calculate your moving expense deduction. Also, while the federal government has suspended the deduction for moving expenses, some states still allow taxpayers to claim a deduction on their state income tax returns.
Some employers offer relocation assistance to help employees move to a new city for work. However, this benefit is not very common. According to the Society for Human Resources Management, only 34% of employers offered a lump-sum payment toward moving expenses to employees in 2019. And only 18% reimbursed the cost of shipping an employee’s household goods.
Before 2018, an employer could pay for or reimburse an employee’s qualified moving expenses, and the payment was a tax-free fringe benefit. However, under the TCJA, employers must now include all moving expenses in an employee’s wages, and the payments are subject to income and employment taxes.
Members of the U.S. armed forces can still exclude qualified moving expense reimbursements from their income if they are on active duty, move pursuant to a military order and incident to a permanent change of station, and their moving expenses would qualify as a deduction if they didn’t get a reimbursement.
In light of these changes, it’s a good idea to negotiate a relocation package from your employer whenever possible. A cross-country move typically costs anywhere from $2,417 to $6,211, depending on the size of your home and how far you’re moving. It can cost even more if you hire a moving company to handle everything from packing and cleaning to unpacking boxes in your new home.
If your employer is willing to reimburse those costs, you’ll pay income and payroll taxes on the reimbursement, but you’ll still be better off than you would be if you covered the entire cost out of your own pocket. Plus, some employers will “gross up” their moving expense reimbursements to counteract the fact that reimbursements are now taxable — meaning they’ll give an employee more money than necessary for the move to cover the added taxes.
Moving is a hassle, and with moving expenses no longer providing a tax break for most taxpayers, there’s less incentive to relocate for a new job — at least for now. However, both the moving expense deduction and the moving expense reimbursement exclusion are set to return as of Jan. 1, 2026, as long as Congress doesn’t decide to make the change permanent.
In the meantime, you can still take steps to save on your move by doing most of the work yourself and shopping around to compare prices. And don’t forget to negotiate a relocation package from your employer. That’s money in your pocket, even if the government takes a cut.
