Tax-Smart Strategies for Moving

Key Takeaways:

• Understand Moving Expense Deductions: The Tax Cuts and Jobs Act (TCJA) eliminated moving expense deductions for most taxpayers. While the deduction was suspended for non-military taxpayers from 2018 through 2025, subsequent legislation made this change permanent beginning in 2026. Members of the Armed Forces may still qualify under specific rules.
• Keep Meticulous Records: Save all receipts and documentation related to your move, as some expenses may still be relevant for military deductions, employer reimbursement reporting, state returns, or general tax recordkeeping.
• Consider the Tax Implications of Residency: Be aware of how changing your state or country of residence can affect your tax rates, credits, filing obligations, and overall liability.

Moving can be a significant life event that not only requires logistical planning but also an understanding of the tax implications that come with it. As tax laws evolve, it’s crucial to stay informed about how these changes may affect the deductions and credits available to you. The Tax Cuts and Jobs Act (TCJA) of 2017 brought about major changes to moving-related deductions, impacting many taxpayers on a lasting basis. By planning your move with tax awareness in mind, you can better anticipate potential tax consequences and avoid surprises come tax season.

As an expert CPA firm, we aim to provide you with a layman-friendly overview of the tax implications of moving, ensuring you’re equipped with the knowledge to make informed decisions.

Current State of Moving Expense Deductions

The TCJA significantly changed the treatment of moving expenses. Prior to 2018, many taxpayers could deduct qualifying moving expenses related to a job relocation if certain distance and time tests were met. For tax years 2018 through 2025, this deduction was suspended for most taxpayers. Beginning in 2026, later legislation permanently eliminated the moving expense deduction for non-military taxpayers. As a result, most individuals can no longer deduct moving expenses on their federal tax return.

Qualifications for Deducting Moving Expenses for Military

Despite the elimination of the deduction for the general public, active-duty members of the Armed Forces may still deduct certain moving expenses. To qualify, the move must be due to a military order and related to a permanent change of station. Eligible expenses generally include the cost of moving household goods and personal effects, as well as travel costs to the new location, excluding meals.

It’s important to note that deductible expenses are generally reduced by any reimbursements received from the government or another payer. Expenses that are fully reimbursed are typically not deductible.

Example: Captain Sarah Johnson, an active-duty member of the Armed Forces, received orders for a permanent change of station from California to Virginia. Because the move was required by military orders, Sarah was eligible to deduct certain moving expenses. She kept detailed records of the costs incurred in moving her household goods and personal effects and tracked her travel expenses to the new location, excluding meals. However, she reduced her deductible expenses by the amount reimbursed by the government. By understanding these rules, Sarah was able to correctly determine the portion of her moving costs that qualified for the deduction.

Documenting Your Move

Maintaining thorough records is key when it comes to documenting your move for tax purposes. You should keep a comprehensive list of all moving-related expenses, including moving company invoices, transportation tickets, temporary lodging receipts, and any other costs directly related to the move. This documentation is especially important for military personnel who may still qualify for moving expense deductions and for employees who receive taxable moving reimbursements.

Storing Documents for Tax Purposes

For tax purposes, it’s generally advisable to retain records supporting deductions and income items for at least three years after the date a return is filed. Organizing and securely storing your moving-related documents—both in physical and digital form—can help ensure you’re prepared if questions arise later. Proper recordkeeping also supports accurate reporting of reimbursements and other move-related income.

Example: When Scott moved from New York to Texas for a new job, he organized and stored all receipts and records related to the move. He created a dedicated file for these documents and scanned them for digital backups. Although his moving expenses were not deductible, this organized recordkeeping helped Scott accurately report his employer’s moving reimbursement as taxable income and ensured he had documentation available if questions arose later.

Tax Residency and Domicile Considerations

When you move, especially across state lines or internationally, you may need to establish a new tax residency. States use different standards to determine whether you are a resident, part-year resident, or nonresident, often based on factors such as time spent in the state, the location of your permanent home, and your personal and financial ties. Because these rules vary widely by state, understanding how your move affects residency status is essential for compliance.

Dual-State Residency and Tax Filings

Moving during the year may result in tax obligations in more than one state. Some individuals may need to file part-year resident or nonresident returns in multiple states. While many states offer credits for taxes paid to another state to help reduce double taxation, the availability and mechanics of these credits differ. Some neighboring states also have reciprocal agreements that simplify filing requirements.

Example: After relocating from California to Oregon for work, Jennifer faced part-year residency in both states. She filed the required state tax returns and carefully tracked income earned in each location. By understanding how each state defined residency and how credits for taxes paid to another state worked, Jennifer was able to meet her filing obligations while minimizing the risk of double taxation.

International Moves and U.S. Taxes

U.S. citizens and resident aliens are generally required to report worldwide income even after moving abroad. However, certain provisions may reduce U.S. tax liability. The Foreign Earned Income Exclusion (FEIE) allows qualifying individuals to exclude a portion of earned income from U.S. taxation, subject to annual limits. Eligibility for the FEIE depends on meeting either the bona fide residence test or the physical presence test. In addition, foreign housing exclusions or deductions may be available, and tax treaties can further affect how income is taxed.

Example: When Kevin moved to France for a new job, he learned that he still needed to report his worldwide income to the U.S. Kevin met the physical presence test and qualified for the Foreign Earned Income Exclusion, allowing him to exclude a portion of his earned income from U.S. tax. He also reviewed the tax treaty between the U.S. and France to better understand how certain types of income were treated, helping him avoid unnecessary double taxation.

Employer Reimbursements for Moving

Employer reimbursements for moving expenses are generally treated as taxable income for non-military employees under current law. Even when reimbursements are intended to cover actual moving costs, they are typically included in wages and subject to income and payroll taxes. For active-duty military members moving under a permanent change of station, certain reimbursements may still be excluded from income. If reimbursements exceed actual qualifying expenses, the excess is generally taxable.

Final Thoughts

When planning a move, it’s important to consider state-specific tax laws, as definitions of residency, filing requirements, and available credits vary widely. International moves add another layer of complexity due to worldwide income reporting and eligibility rules for exclusions and treaties. The IRS provides resources that can help explain these concepts, but for moves involving multiple states or countries, professional guidance can be helpful in navigating the rules and understanding how they apply at a high level.

IRS References

• Moving Expenses for Military: For active-duty military members, IRS Publication 3, Armed Forces’ Tax Guide, provides detailed information on the moving expense deduction and other tax benefits available to service members.
• Tax Residency Rules: If you’re moving to or from the United States, IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, offers guidance on tax residency rules and how to file taxes when living abroad.
• Foreign Earned Income Exclusion: For those working internationally, IRS Form 2555 and its instructions explain how to claim the Foreign Earned Income Exclusion.
• Employer Reimbursements: Although most moving expense reimbursements are now taxable, IRS Publication 521, Moving Expenses, provides historical reference and context, particularly for military personnel.