Can You Write Off Moving Expenses 2021? Decoding the Tax Rules

Moving can be a major life event, filled with packing, unpacking, and a lot of stress. Beyond the physical and emotional toll, there’s also the financial aspect. For many, the question arises: Can you write off moving expenses? The answer, as with many tax-related questions, isn’t always straightforward. This article dives deep into the specifics of moving expense deductions, specifically focusing on the rules that applied in 2021. Understanding these rules can potentially save you money and ensure you’re compliant with the Internal Revenue Service (IRS).

Understanding the Basics: The 2021 Landscape for Moving Expense Deductions

Before we get into the nitty-gritty, it’s crucial to understand that the landscape for moving expense deductions changed significantly. The Tax Cuts and Jobs Act of 2017 eliminated the moving expense deduction for most taxpayers, effective from 2018. This means that, generally, if you moved in 2021, you couldn’t deduct your moving expenses on your federal income tax return. However, there was a notable exception.

The Exception: Armed Forces Personnel

The exception to the rule was for members of the U.S. Armed Forces. If you were an active-duty member of the military and your move was due to a military order, you might have been able to deduct certain moving expenses. This article will focus on the rules that applied to this specific group in 2021.

Who Qualifies for the Moving Expense Deduction in 2021? – The Military Factor

As mentioned, the primary group that could potentially deduct moving expenses in 2021 were members of the U.S. Armed Forces. To qualify, several conditions needed to be met:

  • Active Duty: You had to be an active-duty member of the U.S. Armed Forces.
  • Military Order: The move needed to be made under a military order or due to a permanent change of station (PCS). This means the move was directly related to your military service.
  • Distance Requirements: While there wasn’t a specific distance requirement as there was for other years, the move still had to be related to your military duties.

Eligible Moving Expenses: What Could You Deduct?

If you qualified, what expenses were actually deductible? The IRS allowed for the deduction of “reasonable” expenses. Here’s a breakdown of the types of expenses that could be claimed:

Transportation Costs

This included costs associated with transporting your household goods and personal effects from your old home to your new home. This encompassed:

  • Truck Rental or Professional Movers: The cost of hiring movers or renting a truck to transport your belongings.
  • Packing and Crating: The costs associated with packing and crating your belongings for the move.
  • Storage in Transit: Short-term storage of your belongings (typically up to 30 days) while in transit.

Travel Expenses

Travel expenses for the service member and their family could also be deducted. This included:

  • Gas and Mileage: If you drove your own vehicle, you could deduct the actual cost of gas or use the standard mileage rate.
  • Airfare, Train, or Bus Tickets: The cost of transportation for you and your family.
  • Lodging: The cost of staying in hotels or other temporary accommodations during the move.

Expenses You Couldn’t Deduct in 2021

Even for military personnel, not all moving expenses were deductible. Understanding these non-deductible expenses is equally important:

  • Meals: The cost of meals during the move was not deductible.
  • Temporary Living Expenses: Expenses for temporary living at your new location before you moved into your permanent residence were not deductible.
  • Real Estate Expenses: Costs associated with selling your old home or buying a new one (e.g., realtor fees, closing costs) were not deductible as moving expenses.
  • Pre-Move House Hunting: Costs associated with searching for a new home before the move were not deductible.

How to Claim the Moving Expense Deduction (For Those Who Qualified)

If you were eligible and had deductible moving expenses, here’s how you’d claim the deduction:

Using Form 3903

The IRS uses Form 3903, “Moving Expenses,” to calculate the deductible amount. This form guides you through listing your eligible expenses and arriving at the total amount you can deduct.

Keeping Meticulous Records

Maintaining detailed records is absolutely essential. This includes:

  • Receipts: Keep receipts for all expenses, including truck rentals, mover fees, transportation costs, and lodging.
  • Mileage Log: If you’re claiming mileage, keep a log of the miles driven, the dates, and the purpose of the trip.
  • Military Orders: Have copies of your military orders to prove that the move was due to a permanent change of station.

Filing Your Tax Return

You’d file Form 3903 with your tax return (usually Form 1040). The deductible amount would then be factored into your overall taxable income.

Key Considerations for Military Personnel

For military personnel navigating the complexities of the moving expense deduction in 2021, some additional factors were important:

PCS Orders and Documentation

Your Permanent Change of Station (PCS) orders are the cornerstone of your claim. Ensure you have clear documentation that supports your move. Keep a copy of your orders and any other relevant military documentation.

Understanding Reimbursements

If the military reimbursed you for some of your moving expenses, you could only deduct the amounts you didn’t get reimbursed for. Be sure to understand what expenses were covered by your reimbursement and only claim the uncovered amounts.

Seeking Professional Advice

Tax laws can be complex. If you’re unsure about your situation, consulting with a qualified tax professional is always a good idea. They can provide personalized advice based on your specific circumstances and help you maximize your deductions while staying compliant.

Potential Pitfalls and Mistakes to Avoid

Navigating the tax landscape can be tricky. Here are some common pitfalls to avoid when claiming moving expenses:

  • Claiming Non-Deductible Expenses: Ensure you’re only claiming expenses that are actually deductible. Double-check the IRS guidelines.
  • Missing Documentation: Failing to keep proper records can lead to your deduction being denied.
  • Incorrectly Calculating Expenses: Carefully calculate your expenses and double-check your work on Form 3903.
  • Assuming General Rules Apply: Remember that the rules for moving expenses were significantly altered in 2018. Make sure you understand the 2021 rules.

Frequently Asked Questions About Moving Expense Deductions in 2021

Here are some common questions about moving expense deductions, separate from the main headings:

What if I Moved for Work but Wasn’t in the Military? Unfortunately, if you weren’t in the U.S. Armed Forces, you most likely couldn’t deduct your moving expenses in 2021. The Tax Cuts and Jobs Act of 2017 eliminated the deduction for most taxpayers.

Can I Deduct the Cost of Selling My Old Home to Move? No, costs associated with selling your old home, such as realtor fees and closing costs, are not deductible as moving expenses.

What’s the Difference Between a Permanent Change of Station (PCS) and a Temporary Duty (TDY)? A PCS involves a permanent change of duty station, while a TDY involves a temporary assignment. Only moves related to a PCS qualified for the moving expense deduction in 2021 for military personnel.

How Does the IRS Know if I’m Lying About My Moving Expenses? The IRS can audit your tax return and request documentation to support your claimed expenses. This is why it’s crucial to keep detailed records.

Can I Amend My Tax Return if I Forgot to Claim Moving Expenses? Yes, you can file an amended tax return (Form 1040-X) to claim moving expenses if you realize you missed the deduction. However, there are time limits for filing an amended return.

Conclusion: Navigating Moving Expenses in 2021

In conclusion, the ability to deduct moving expenses in 2021 was significantly limited, with the primary exception being for members of the U.S. Armed Forces who moved due to a military order. If you qualified, you could deduct transportation costs, including the cost of movers, truck rentals, and travel expenses for yourself and your family. Remember to keep detailed records, including receipts and military orders, to support your claim. While the rules have changed, understanding these specific details is crucial for military personnel to potentially reduce their tax liability. For everyone else, understanding that the deduction was generally unavailable is equally important to avoid any confusion or errors on their tax return. Always consult with a tax professional for personalized advice.