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The moving expense deduction is going away under the new tax plan, which means you'll need to act quickly if you want to capitalize on it.
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We all know that moving is expensive, and if you have a lot of boxes and suitcases to haul, your costs might border on astronomical. In fact, the average in-state move costs roughly $2,300, according to the American Moving and Storage Association, while the average interstate move costs $4,300. Ouch.
There is, however, a way to make your move more affordable, and it's to snag a tax break in the process. Under the current tax code, you're allowed to deduct the cost of a move if you're relocating for job-related purposes. Though there are certain criteria you'll need to meet, which we'll get into in a minute, if you qualify for the deduction, you'll get to write off the cost of hiring movers, paying for storage, and any other reasonable related expenses.
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Sounds like a pretty good deal, right? There's just one problem. Now that the new tax bill has been finalized, several key deductions are going away -- including the moving expense deduction. Come 2018, you won't be eligible to deduct any of the aforementioned costs even if your move is work-related. And the suspension of the moving expense deduction is set to hold steady all the way until 2025. So if you're planning a move for job purposes, it pays to start packing -- because 2017 is the last year you'll get to claim this deduction for quite some time.
To qualify for the moving expense deduction, you'll need to meet a couple of key criteria. First, your new job must be located at least 50 miles farther away from your old home than your previous job was located from that same home. Sounds complicated, right? But, actually, all this means is that if your old job was 20 miles away from your former home, then your new job must be at least 70 miles away from that same home in order to take the deduction.
Additionally, to claim the deduction, you're required to work for at least 39 weeks during the one-year period following your move. Keep in mind, however, that you don't need to work those 39 weeks consecutively. Furthermore, if you're self-employed, the rules vary slightly -- you're required to work 78 weeks during the two-year period following your move.
Provided you meet these criteria, there are a host of moving expenses you're allowed to deduct on your taxes, including:
Keep in mind that you'll need to keep a detailed record of your moving costs to claim the deduction. But if you do, the savings could be huge.
If you're planning a work-related move for, say, January or February 2018, you may want to reconsider and expedite the process so that your move is completed this year. That way, you'll get a chance to claim the deduction.
How much might the moving expense deduction save you? Well, like all deductions, it's a function of your effective tax rate, but if you rack up $5,000 in eligible moving expenses, and your effective tax rate is 25%, you'll shave $1,250 off your tax bill, just like that. Wait until 2018, however, and that tax break goes away.
Will throwing together a last-minute move be stressful? Most likely. But if you can pull it off, you stand to benefit in a very big way.