Tax Reform for Individuals: Moving Expenses

Relocating for a current job or new opportunity used to mean you could deduct some of your moving expenses. Under the Tax Cuts and Jobs Act (TCJA), the tax treatment of moving expenses has changed, and will affect employees and families relocating because of their employers. Below we discuss the new law going forward, how it compares to the previous law, and how individuals will be affected by the change.

Previous Law

Under the previous rules for moving expenses, an above-the-line deduction was allowed if the expenses paid or incurred during the current tax year were connected to the relocation of a taxpayer as an employee or as a self-employed individual at a new principal place of work. These expenses were only deductible if the move met certain distance requirements.

These distance requirements included the new principal place of work being at least 50 miles farther from the taxpayer’s former residence than their former place of work. If the taxpayer had no former place of work, the new principal place of work had to be at least 50 miles from their former residence. Moving expenses consisted of the cost of moving household items and traveling from the former residence to the new place of residence. Meals while traveling were not includable in moving expenses.

In addition, special rules applied for a member of the Armed Forces of the U.S. In the case of such individuals who were on active duty and were moved due to a military order, the limitations related to distance from the taxpayer’s prior residence did not apply.

New Law

Under the new law, moving expenses are temporarily suspended for moves beginning after December 31, 2017 and before Jan. 1, 2026. An exception to the suspension is allowed for any taxpayer who is an active duty member of the Armed Forces, and moves pursuant to military order.

Impact on Individuals

This change will affect any individual who moves for work and is not an active duty member of the Armed Forces. Before the TCJA, any individual that moved because of work potentially would receive an above-the-line deduction, if the individual’s move met previously discussed criteria. Moving expenses will no longer be an above-the-line deduction going forward, unless a taxpayer is an active duty member of the military.  Please contact an Anders advisor for further details or with any questions on how the new tax law will affect you.