Tax reform is now a reality, and millions of Americans are coming to grips with new tax provisions that will save them money as well as disappearing tax breaks that could offset some of those savings. Plenty of high-profile deductions, such as the provision for state and local taxes and changes to mortgage interest rules, got the bulk of lawmakers' attention during the tax reform debate. Yet largely going unnoticed was a deduction that nearly everyone used at least once during their lifetimes, and starting in 2018, it will no longer be available to taxpayers.
The moving expense deduction isn't the most commonly used tax break, with year-to-year totals for those claiming the reduction in gross income amounting to less than 1% of the American public. Yet for those who qualify, the deduction often produced hundreds or even thousands of dollars in tax savings. Let's take a closer look at moving expenses and how those who can use the deduction one last time in 2017 should do so.
Do I qualify for the moving expense deduction?
The moving expense deduction relies on the idea that people move for work-related purposes. Accordingly, the deduction isn't available to those moving for college or to start their first job. Instead, it's designed for those who had a job in one location and then moved to another location for a different job.
There are tests to determine whether you can deduct moving expenses. First, you have to work in your new location full-time for at least 39 weeks out of the 12-month period right after you move. That doesn't mean that you can't deduct moving expenses late in the year -- it's enough that you expect to retain your full-time job for a 39-week period, and then subsequently meet the requirements of the test after you file your return.
The more complicated test requires that the move be fairly substantial in distance. Specifically, to justify a move, the IRS says your new job location has to be at least 50 miles further away from your old home than your old workplace was. The rationale is that otherwise, you could have worked your new job from your old home and therefore didn't need to move.
What can I deduct as moving expenses?
The provision simply refers to deducting reasonable costs of moving, including personal property transportation costs and your own travel to the new location. For travel, you can either deduct actual costs or simply use the IRS standard rate of $0.17 per mile for 2017. You can also deduct expenses for lodging on your way to your new home. For your property, the costs of a moving service would be eligible, as would storage costs for up to 30 days and expenses incurred to pack up your belongings.
On the other hand, you can't deduct costs like meals while moving, expenses related to establishing your new home such as utility signup or car registration fees, or realtor sales commissions on your old home.
The tax break can end up being quite sizable. More than 1.13 million taxpayers claimed a total of $3.69 billion in deductions for moving expenses in the most recent year for which IRS data is available. When you do the math, that works out to an average of $3,256 per eligible taxpayer.
Get your moving expense deduction if you can
Best of all, you don't have to itemize to claim the moving expense deduction. It's available to any taxpayer as an adjustment to gross income.
Losing the moving expense deduction in 2018 and beyond will be a blow to taxpayers. But for those who made a job-related move in 2017, claiming this lucrative deduction could be an appropriate swan song to a valuable tax break.