Posted by Fred Lake

Moving Expenses To Take Your First Job

Moving Expenses To Take Your First Job

Getting a job, or a new one, is an important event & decision that requires a change in your personal and professional life, but when the opportunity arises, especially with great incentives or a promotion, it's usually wise to respond & pursue it.

Have you moved to a new job this year, or are you planning to, soon?

According to the U.S. Census Bureau, just a little over 10% of the more than 32 million people who moved in 2018 did so because of a new job or job relocation. If you happen to be one of them, you might have heard that moving expenses are tax-deductible, and you want to know how you can benefit from them. 

Perversely, thanks to the Tax Cuts and Jobs Act (TCJA) of 2017, moving expenses are no longer deductible for most people. However, the deduction is still available to some taxpayers, and there are other ways to offset the cost of the move, so let’s explore that.

Moving Expenses Deduction: The New Rules

TCJA has suspended the movement of expense deductions for fiscal years 2018-2025 for all non-military taxpayers. Active military personnel who move because of a permanent job change can still deduct the change costs. The definition of a permanent change of station above still applies. If you use your car to drive, family members, or belongings in your new home, you can deduct the standard mileage rate or actual expenses of 18 cents per mile.

If you qualify, you will use Form 3903 to calculate the deduction for moving expenses. You can find more information on how to deduct moving expenses and an illustrated example of how the deduction is calculated in IRS 521.

Although the federal government has suspended the relocation expense deduction, some states still allow taxpayers to claim a deduction on their tax returns, so check the tax laws of the state in which you live.


Reimbursement of Moving Expenses To The Employer

Some employers offer relocation assistance to help existing employees move to a new city for work or to attract talent outside of their geographic area. However, this form of benefit is not very common.

According to the Society for Human Resource Management, only 28% of employers offered general payment for employee relocation expenses, and only 12% reimbursed the cost of shipping an employee's household items.

Before 2018, an employer could pay or reimburse an employee's eligible relocation expenses. The payment was considered an additional non-taxable benefit, meaning it was not included in the employee's taxable income for the year. However, according to the TCJA, employers must include all expenses related to changing an employee's salary, and payments are subject to income and employment taxes. However, members of the U.S. military may exclude reimbursements for qualifying changes in their income if they are active on duty, move under military order and incident at a permanent change of station, and moving expenses will be eligible as a deduction if they are not reimbursed.

Given the deduction changes, it is a good idea to negotiate a moving package with your employer where possible. According to experts, traveling across the country typically costs between $ 1,912 and $ 5,300, depending on your home's size and how far you travel. It can get even more expensive if you hire professional couriers to take care of everything, from packing and cleaning to unpacking the boxes in your new home.

If your employer is willing to reimburse you for these costs, you will pay income tax and checks on delivery, but you'd better cover the entire cost out of pocket.

Additionally, some employers will increase relocation expense reimbursement to offset the fact that reimbursements are now taxable, meaning they will provide an employee with more money than needed for the relocation to cover additional taxes.

Last Word

Moving can sometimes be difficult, and since moving expenses no longer offer tax breaks for most taxpayers, there are fewer incentives to move to a new job, at least for now. However, both the deduction of administrative costs and the exclusion of reimbursement of administrative costs are scheduled for January 1, 2026, provided Congress does not decide that the transfer is permanent.

Meanwhile, you can continue to take steps to save the changes by doing most of the work yourself and comparing prices. And don't forget to negotiate a moving package with your employer.



Fred Lake
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