Can I Write Off Moving Expenses In 2021? A Comprehensive Guide
Moving is stressful enough without worrying about taxes. If you moved in 2021, you might be asking yourself: Can I write off moving expenses in 2021? The answer, unfortunately, isn’t a simple yes or no. The rules surrounding deducting moving expenses changed significantly with the Tax Cuts and Jobs Act of 2017, which went into effect for the 2018 tax year. Let’s delve into the details and clarify what you need to know.
What the Tax Cuts and Jobs Act Changed About Moving Expense Deductions
Before 2018, the IRS allowed taxpayers to deduct moving expenses under certain conditions. This deduction was available for both employees and self-employed individuals. However, the Tax Cuts and Jobs Act of 2017 drastically altered these rules. For the 2018 through 2025 tax years, the deduction for moving expenses is generally suspended for most taxpayers. This means that for most people, you cannot deduct your moving expenses on your 2021 taxes.
Who Can Still Deduct Moving Expenses in 2021?
While the general rule is no deduction, there’s a significant exception: Active-duty members of the U.S. Armed Forces. If you are a member of the military and you moved due to a military order and due to a permanent change of station (PCS), you may still be able to deduct certain moving expenses. This is a critical distinction, and it’s essential to understand the specific requirements to qualify.
Understanding “Permanent Change of Station” (PCS) for Military Personnel
The term “permanent change of station” is central to the military moving expense deduction. A PCS is a move from one military base or duty station to another, or from your home to your first duty station, or from your last duty station to your home. It must be a permanent move, not a temporary assignment. The move must be under military orders.
Qualifying Moving Expenses for Military Personnel
If you qualify as an active-duty military member and your move meets the PCS criteria, you can deduct the following moving expenses:
- The cost of moving your household goods and personal effects. This includes the cost of packing, crating, and transporting your belongings.
- Travel expenses for you and your family. This includes the cost of driving, flying, or taking other forms of transportation to your new home. It also includes the cost of lodging, but not meals, during your travel.
Expenses NOT Deductible for Military Personnel
Even if you qualify, certain expenses are not deductible. These include:
- Meals during your move.
- Expenses related to house hunting in your new location.
- Costs associated with selling your old home or buying a new one.
Gathering the Necessary Documentation
If you are an active-duty military member claiming the moving expense deduction, you’ll need to gather specific documentation to support your claim. This typically includes:
- Your military orders that authorized the move and established a permanent change of station.
- Receipts and records of all your moving expenses, such as receipts from moving companies, airline tickets, and lodging receipts.
- A completed Form 3903, Moving Expenses. This is the form you’ll use to calculate your deductible moving expenses and claim the deduction on your tax return.
Calculating the Moving Expense Deduction for Military Members
Once you’ve gathered your documentation, you’ll use Form 3903 to calculate your deduction. Here’s a general outline of the process:
- Determine your eligible moving expenses. This includes the cost of transporting your household goods and personal effects, as well as travel expenses for yourself and your family.
- Add up all your eligible expenses.
- Enter the total amount on Form 3903.
- Transfer the deductible amount from Form 3903 to your Form 1040, U.S. Individual Income Tax Return.
Understanding the Impact of the Tax Cuts and Jobs Act on Your Taxes
The suspension of the moving expense deduction for most taxpayers under the Tax Cuts and Jobs Act significantly changed the tax landscape. This change was intended to simplify the tax code, but it also meant that many people who previously benefited from the deduction could no longer claim it. It’s important to be aware of these changes when preparing your tax return.
Alternatives to Deducting Moving Expenses: Employer Reimbursement
Even if you can’t deduct moving expenses on your own, there’s another potential avenue for tax relief: employer reimbursements. If your employer reimbursed you for moving expenses in 2021, the tax treatment depends on whether the reimbursement was considered taxable income.
Taxable vs. Non-Taxable Employer Reimbursements
- Taxable Reimbursements: If your employer included the reimbursement as part of your taxable wages, then you wouldn’t be able to deduct moving expenses. The reimbursement is simply treated as part of your income.
- Non-Taxable Reimbursements: If your employer directly paid for your moving expenses or reimbursed you separately, and the reimbursement was not included in your taxable wages, then this could be considered a non-taxable benefit. This is more common for military moves.
Reviewing Your W-2 Form
To determine how your employer treated any moving expense reimbursements, carefully examine your W-2 form. The amount of any taxable wages is listed in Box 1, and any non-taxable reimbursements may be indicated in other boxes. If you have questions, reach out to your employer’s HR or payroll department.
When the Deduction Might Return: Potential Future Changes
The provision suspending the moving expense deduction for most taxpayers is currently scheduled to expire at the end of 2025. Unless Congress acts to extend the provision, the deduction could potentially return for the 2026 tax year. Tax laws are always subject to change, so it’s essential to stay informed about any updates from the IRS or legislation.
Frequently Asked Questions About Moving Expenses
Here are some frequently asked questions that you might find useful:
What if I moved for a new job in 2021, but I’m not in the military?
Unfortunately, unless you are an active-duty military member and your move meets the PCS criteria, you generally cannot deduct your moving expenses. The Tax Cuts and Jobs Act suspended the deduction for most taxpayers.
Can I deduct the cost of temporary storage of my belongings during a move?
For active-duty military members, the cost of temporary storage of your belongings can be included as part of your deductible moving expenses, within reasonable limits.
Do I need to itemize deductions to claim the moving expense deduction?
No. If you are an active-duty military member and qualify for the moving expense deduction, you can claim it regardless of whether you itemize deductions or take the standard deduction.
What if I received a relocation package from my employer?
If your employer provided a relocation package, the taxability of the package depends on how it was structured. As mentioned earlier, review your W-2 form and consult with your employer’s HR or payroll department to understand the tax implications.
Where can I find the most up-to-date information on moving expenses?
The IRS website is the best source for the most current information. Specifically, search for IRS Publication 521, Moving Expenses, which is updated annually. You can also consult with a qualified tax professional.
Conclusion
In summary, the ability to deduct moving expenses in 2021 is extremely limited for most taxpayers. The Tax Cuts and Jobs Act of 2017 suspended the deduction for most individuals. The primary exception is for active-duty members of the U.S. Armed Forces who move due to a military order and a permanent change of station (PCS). If you qualify, be sure to gather the necessary documentation, including your military orders and receipts. Carefully review your W-2 form to understand how any employer reimbursements were treated. Stay informed about potential future changes in tax laws. Remember, consulting with a tax professional is always a wise choice to ensure you’re taking advantage of all the deductions and credits you’re eligible for, and to navigate the complexities of tax regulations.