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Tax Cuts and Jobs Act – Significant Changes to Moving Expense Deductions

Tax Cuts and Jobs Act – Significant Changes to Moving Expense Deductions

As a result of the recently passed Tax Cuts and Jobs Act, job-related moving expenses will no longer be deductible on an individual’s federal income tax return. This new legislation will go into effect for tax years after December 31, 2017 and before January 1, 2026. Therefore, although this will not affect the filing of 2017 tax returns, it is important to understand the new tax code’s impact for the 2018 tax year. There is an exception: any active duty members of the military will be able to deduct required moving expenses under both the current and 2018 tax codes.

Prior law

Under the current tax code, employment relocation moving expenses are deductible, assuming they meet the following requirements: the move is related to the new job; the new job location is at least 50 miles farther than the distance between the former home and former job; and the taxpayer must work full-time for at least 39 weeks during the first 12 months of arriving at the new location.

Any qualifying unreimbursed or employer reimbursed moving expenses are fully deductible and excluded from income, and therefore not taxable.

Tax Cuts and Jobs Act (“TCJA”)

Beginning in 2018, this deduction for moving expenses will be eliminated. As a result, any unreimbursed moving expenses will not be deductible. Furthermore, any employer reimbursed moving expenses will be not deductible, included in income, and taxable to the taxpayer.

Item Prior Law TCJA
Moving Expenses Deduction File Form 3903 Eliminated
Unreimbursed moving expenses Fully Deductible Not Deductible
Employer reimbursed moving expenses
  • Fully Deductible
  • Excluded from Income
Not Deductible Included in Income 
Requirements for deduction:
  • The move is related to the start of new job
  • Distance Test: New job must be at least 50 miles farther from your former home than your old job was from your former home
  • Time Test: Must work full-time for at least 39 weeks during the first 12 months upon arriving to new job location
N/A
Exceptions Active Duty Members of the Military Same

Written by Lauren Swavely.  For more information, contact Lauren or Barry Groebel.