Pub 521

Publication 521 is a publication of the IRS that explains how to claim moving expenses on your tax return. This article covers the rules included in Publication 521 for retirees who move to the United States and survivors of decedents who move to the U.S.

Publication 521, Pub 521 for short, is a document that provides information on the tax deduction of moving expenses. It also describes how to report when a moving expense is reimbursed by an employer. It covers both accountable and non-accountable reimbursement plans. It discusses the time and distance tests that must be met to claim a moving expense deduction.

The Internal Revenue Service (IRS) allows the deduction of reasonable expenses for moving household goods and personal effects from one residence to another and traveling from a former residence to a new place of employment or home, including meals. These expenses must be related to the relocation of a person from his or her old residence to a new residence, and they do not include any costs associated with purchasing or improving a home.

The IRS has substantially revised Publication 521 to reflect limitations on the moving expense deduction and exclusion imposed by the Tax Cuts and Jobs Act. The new rules suspend the deduction and exclusion for eight years beginning in 2018, except for members of the Armed Forces on active duty who move because of a permanent change of station and certain moves by servicemembers’ spouses or dependents.

If you are an active-duty military member and relocate on orders, your move is automatically tax deductible. You can also deduct your unreimbursed moving expenses if you meet two other requirements: the time and distance tests.

  • To pass the distance test, your new job location must be 50 miles farther from your old home than the location of your former job. To pass the time test, you must start your new job and work full-time for at least 39 weeks in the first 12 months after your move.
Are Moving Expenses Tax-Free
Pub 521 1

Are Moving Expenses Tax-Free?

The Tax Cuts and Jobs Act of 2017 (TCJA) suspended the deduction for moving expenses if not reimbursed by your employer or an agency, such as the government. However, this suspension is temporary and may return if Congress decides to reinstate the deduction.

The IRS allows moving expenses to be deducted only if they are reasonable and necessary for relocation. The IRS defines “reasonable costs” as the expenses you incur when you move, including travel costs to and from your old and new home. These expenses may include renting a moving truck, hiring professional movers, and packing materials. You can also deduct expenses for renting a storage unit for your belongings while in transit.

While the federal government suspended the moving expense deduction in 2017, some states have retained this tax deduction. For example, Arkansas, New Jersey, California, Hawaii, and Massachusetts allow the deduction on state tax returns.

In addition, some employers reimburse employees for their move costs as a part of a larger, company-wide move-related expense, which can be deductible for your business. These reimbursements can also be taxable to you, so it is best to keep track of all expenses and payments related to your move to claim the tax deduction.

Alternatively, some employers “gross up” these benefits by adding money to your reimbursement for your state and federal taxes, which can increase the amount of your benefit. This can increase your net payment by about $2,600 to reach your goal of $6,000 in total compensation for the move.

If you have questions about whether or not your moving expenses qualify for a tax deduction, it is best to consult an experienced CPA. They can help you determine whether you can take a moving expense deduction and how much you can claim.

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