Were you planning to move in 2023 while relying on moving expenses deduction to help you financially survive that process? Then we have some bad news. The notorious Tax Cuts and Jobs Act that was released in 2017 suspended reimbursement for a vast majority of people who were counting on it. But, don’t cancel your relocation plans yet; if you are lucky enough to live in certain states or do specific jobs, not all is lost. We also have some alternatives that can be useful to everyone, so let’s see how you can move without breaking the bank.
Calculating costs is always a time-consuming process, but you can hardly avoid it when relocating.
The Latest Information on Moving Expenses Deduction
At the beginning of 2018, we said goodbye to deductible moving expenses until 2026. It is a shame because this was a helpful method for people whose reason to move was getting a new position and they planned on relocating for a job to another state. Although there were certain requirements such as the distance and time tests, it was all still doable for a lot of people who wanted to move and claim reimbursement for their taxes.
In the good old days, subtraction of moving costs included even renting storage up to 30 days, and other reasonable costs of relocating household goods. The cost of a plane or tickets, as well as the cost of gas, if you were driving to your new home, were also deductible.
Fill Out the IRS Form and Get a Tax Refund in Advance
The biggest advantage was that you were able to claim your reimbursement before you even knew whether you fulfill the requirements or not. This was only one of a few tax deductions that worked this way. The process was pretty straightforward: you claim your expenses related to relocation by filling out the IRS Form 3903 and adding a personal tax return for the year of your relocation.
Test Turbotax Calculator for the Return of Deduction Expenses
Since you got the means before you knew if you were eligible, in case it turned out you were not, you had to return that money. You could do that by including the amount of subtraction in “other income” on your next tax return. If you use Turbotax, you can file your taxes online, because this software is created to guide users step-by-step through the process of returning taxes.
In these circumstances, it is better to start saving for your relocation expenses as soon as possible.
Who Can Apply for Moving Expenses Tax Deduction in 2023?
Don’t fall into relocation depression yet because there are some good news. The first exception to this new 2017 rule, when it comes to professions, are military members. Active-duty service men and women who have to move due to military orders can still deduct the costs of their relocation in the following situations:
- Relocating from your home to the first place of your active duty
- Relocating from one permanent post of duty to another one
- Relocating home or close to it in the US from your last post of duty
Luckily, members of the military can still reimburse their relocation costs.
In Which States Can You Apply for Moving Expenses Tax Deduction in 2023?
Currently, there are seven static and rolling conformity states that have not adopted the federal changes that suspended the option for their residents to cut relocation costs. You can still file to deduct your costs if you are lucky enough to live in one of them. Simply fill the IRS form and file your request. Here are the states in which you can still file for the return of relocating costs:
- New York
- California
- Arkansas
- Hawaii
- Massachusetts
- New Jersey
- Pennsylvania
Some states still allow their citizens to file for this option. Citizens of NY, among others, can reimburse part of their relocation costs.
Criteria You Must Meet
In order to get a refund, it is not enough to just move somewhere and expect that someone else is going to pay for it. There are several criteria that the IRS expects you to fulfill:
- Time – once you move, whether you’re moving out of San Francisco or looking for another suburb of Chicago, you have exactly 12 months to start your job. You can still move even after your job starts. What matters is that your relocating date and the beginning of your job are no more than one year apart.
- Distance – your new work needs to be at least 50 extra miles away from your old home than your previous job. For example, if your previous workplace was 25 miles away from your old home, then your new job has to be at least 75 miles away from your old place. If it is any less, you will not qualify to deduct costs, so keep that in mind when house-hunting and considering relocating to the suburbs.
- Length – whether you are self-employed or not, you should have at least 39 working weeks during the first year at your new workplace. Also, self-employed people have to have 78 working weeks for the first two years.
Getting a job is only half of the work if you want to get your funds back.
Which Relocation Costs Are Refundable
Relocating is expensive, whether you are moving with kids, as well as moving alone to another state, or if you are relocating with pets. We are already paying so many taxes, so why not take advantage of the opportunity to get something in return? There are so many cross-country moving services that can take a lot of your income and put a strain on your moving budget. That’s why it is good to know that you can deduct costs for certain services:
You can get your money back for various expenses, including packing, transportation tickets, road tolls, accommodation, and many more.
Alternative Ways to Deduct the Cost of Relocating
Who has the time to wait for 2026 to move and get some help for it? And rumors say that Congress is considering banning deductible relocation costs for good. Business opportunities need to be taken as quickly as possible. Otherwise, if you don’t create a moving-out list fast, you might miss an opportunity of a lifetime. If you are looking for moving tips on how to save some money on your credit card before your first paycheck arrives, here are some ways you can do it, in case you cannot deduct the cost of your relocation.
Don’t Pay for the Things You Can Do On Your Own
If you are on a budget and you’re looking for the cheapest way to move out of state, then you don’t have the luxury to pay for the services you can do with your two hands. Or four if you can find someone to help you. Packing kitchen items, easy things like books, or bulky furniture, even belongings like clothes is something that you can ask your friends to help you with. Or you can learn a few packing tips and tricks to avoid making common moving mistakes.
Furthermore, when you relocate you can unpack on your own. Also, ask if a neighbor or someone else you know has a truck they could lend you – it will cut the costs of moving significantly. You can also transport your car across the country yourself and skip auto shipping services.
Before You Pull Out Your Credit Card, Compare the Prices
One of the things to consider when relocating to a new state is that you will certainly have to shop for some things. Don’t be lazy and purchase the first item you see online; research a little bit and try to compare prices before you enter your credit card info. The same goes for additional services, at least the ones you have to use. There are so many companies in the business that you can easily find some that will form a reasonable price for you.
Free Stuff Finder
Managing to get something for free can be considered a special skill nowadays, but it is not as hard as it seems, and you shouldn’t be afraid to ask. Many local stores pile things like boxes and bubble wrap or throw them away. That is one way you can get your packing materials for free. Old newspapers can also be useful for wrapping fragile items such as glassware and tucking them inside boxes or as a padding material when you are boxing up electronics.
Relocating Off-Season
Is there such a thing as the best time of the year to move? Well, in some states, yes, although when a business opportunity calls, every time of the year is the right one. You can’t really predict whether you are going to get a business offer during the cheapest time of the year to relocate, but you can arrange some other details. For example, the day and the time. Usually, you should get a more affordable deal if you schedule to move during the early morning hours and on weekdays. Also relocating during the winter is advised.
Moving-Expense Reimbursements
Business owners are aware that if they spot a skilled and qualified worker, it is worth investing in their relocation. So after many states suspended this law, companies had to find a way to help their employees. In some form, they managed to do it, but there is a catch. Employer reimbursements are one way to do it, but they are taxable as far as the employee is concerned. Meaning that you will have to pay taxes for the money you get. It could still be a win-win situation, but it is not the best one, so many employers are looking to gross up the amount they are giving.
Donate or Sell
If you have things you know you are not going to use in the future, it is always better to get rid of them before relocating, especially if you’re moving into a smaller home. It will save you some packing materials and storage space, and you can have a clean start. If you have some valuable items, organize a garage sale (it’s doable if you’re relocating in the summer, so it’s warm outside), or post them online; it will bring you some extra bucks. You can also donate unwanted items if you know any charity organizations in your town or someone who could use them. For those items that you won’t sell, you can get moving insurance and create a photo inventory for them.
If you do a bit of research, you can figure out how to do a lot of things on your own and save a few bucks.
(Un)Popular Opinions – Pay for It Now, It Will Come Back Later
If you got a really good job offer, but your employer is not offering to cover the cost of your relocation, do not refuse it straight away. In case they are offering you more than a decent income, you will quickly be able to compensate for your relocation costs. So think of it as an investment in your future, because once you start earning more money, you will be glad you made that decision. The issue of covering these costs is one of the most important relocation questions to ask your employer.
Spending a bit more at the beginning might pay off more in the long run.
The Bottom Line
It seems that we can forget about deductible costs for relocating in the near future unless they come up with a new law so that the refund of these taxes is available to everyone. But no one can guarantee that relocation expenses tax deduction will ever come back. So everything is up to us, but do not lose your self-esteem, or let that moving stress kick in. Forget the anxiety about moving out, and try some of our alternatives; it will save you more money on your bank account than you think. After that, the only thing left is to check the safety of your future neighborhood and to relocate.
