Are Inter-State Moving Expenses Tax Deductible?

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Moving to a new state for work can be an exciting, but it can also be an administrative nightmare. And not to mention expensive. From making sure that all your valuables are are safely packaged and transported to ensuring your new home is ready for use when you move into it, the costs of moving and setting up house in a new state, can quickly add up. This may make you wonder whether you could claim some of these expenses back when filing your taxes, especially if your relocation is for work purposes. We take a closer look.

Tax deductions for moving expenses

If you moved before the Tax Cuts and Jobs Act (TCJA) which came into effect in 2017, you may be able to deduct moving expenses if you moved for work or business purposes. But after 2018, moving expenses are no longer considered tax deductible for most individuals. Only those with the following exceptions to the general rule may still be eligible for this deduction:

  • Active military members that meet certain circumstances and criteria, when the interstate move is as a result of military order.
  • Individuals that moved prior to 2018 but didn’t claim the moving expense tax deduction.

To be eligible for the deduction, the taxpayer must meet certain requirements, such as the distance test and the time test – which requires that the new job location be at least 50 miles farther from their former residence than their old job location; and that the relocation is for full-time work for at least 39 weeks during the 12-month period following their move.

If you qualify according to the outlined and are eligible for moving deductions, you would need to submit all qualified moving expenses to the IRS using Form 3903 when submitting your federal income tax return.

Individuals who do not qualify per the criteria outlined above do not need to submit moving expenses on their tax returns, but if your employer has reimbursed you for some or all of your moving expenses, the reimbursement is generally not considered taxable income. Note however that if your employer paid you for your moving expenses and the amount you received was more than the actual moving costs you incurred, the excess amount may be taxable as income.

Different states may have different rules at the state level when it comes to tax deductions for moving expenses. Which means that in some states, such as California, New York and others, you may be able to deduct moving expenses on your state income tax return, even if you can’t do so on your federal income tax returns. It is important to consult with a tax expert that understands the rules in this regard.

Fusion CPAs help individuals accomplish successful moves to other states in the US by offering financial planning, tax preparation, bookkeeping, and software solutions. Trying to escape a state with high-income taxes could come with other hidden costs and must be carefully considered. With our outsourced accounting and tax services, you will know the economic outcome, tax considerations & implications, and your financial position before moving to another state.

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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.