It's Military Moving Season, How Does That Impact Your Taxes?
by John Cooney on Jun 4, 2019
It’s moving season for the Department of Defense…every year about 65% of the PCS moves for the year happen between May 15th and August 31st. Don’t let your move sneak up on you. In this great Military.com article, they offer several tips and I will share two here; book your move early and use the move as way to de-clutter. If you still have boxes unopened from your last move, maybe it’s time to donate the contents to charity! If your move is scheduled for this Summer (or next Summer for that matter) I would also recommend checking www.move.mil and read through the information and FAQs offered on the site, it has a wealth of information for you. All that said, the point of this article is not to help you move, but to help make sure you are able to correctly deduct from your income taxes any unreimbursed expenses related to your move.
Tax Cuts and Jobs Act (TCJA) and Moving Expenses
With the passage of the TCJA in November 2017, tax-payers were no longer able to deduct unreimbursed moving expenses for job related moves. However, members of the military were exempted from this, and still retain eligibility to deduct those expenses from their income when filing taxes. It is also not just limited to those tax-payers who are itemizing deductions, tax-payers who take the standard deduction can take advantage of it as well.
Who is Eligible?
To qualify for the deduction, you must meet the following requirements:
- Must be a member of the Armed Forces and on active duty
- Your move must be a result of a permanent change of station (PCS)
- PCS moves include a move from your home to your first active duty post, move from permanent post of duty to another permanent post, or a move from your last post of duty to your home (must occur within one year of ending your active duty)
What Can You Deduct?
- Unreimbursed expenses only; if the Government reimbursed you or paid for the expense directly, you cannot deduct it
- The cost of moving household goods and personal effects
- Travel related expenses, to include:
- Lodging (within certain limitations)
- Auto Expenses
- Can choose to deduct out-of-pocket expenses (like gas and oil), Or
- Blanket payment of 18 cents per mile
- Parking and toll expenses (can be added to both the out-of-pocket and mileage option)
- Storage expenses for any period of 30 consecutive days after goods are picked up from your old home and before they are delivered to your new home
What Can’t You Deduct?
- Expenses that you were reimbursed for
- Moving furniture that you purchased on the way from your old home to your new home
- Unnecessary side trips or lavish spending
- Moving services that were paid for directly by the Government
What About Foreign Moves?
For moves outside of the United States, you are eligible for the same deductions, with a couple additions as well.
- Cost of moving household goods and personal effects to and from storage
- Storage costs for part or all of the time you are at your new job location as long as it remains your permanent duty location; for this to be a qualifying expense, your duty location must be outside of the United States
How Do You Claim the Deduction?
First, make sure you are keeping accurate and detailed records. You will need to know what the Government provided for you, what they reimbursed you for, and what you actually spent.
If what you spent is less than what they reimbursed you for, you may have to report the excess as income. You will need to look at how DFAS reports the payment on your 1099 to determine how you will need to handle it from an income tax perspective. However, if what you paid is less than what you were reimbursed for AND you satisfy the requirements we talked about before, you could be a candidate for the deduction.
To claim the deduction, you will use IRS Form 3903. Using this form, you can determine the deduction amount, which is then transferred to Schedule 1 of IRS Form 1040, your personal income tax form. The unreimbursed expenses are subtracted from your income to lower your Adjusted Gross Income, which will help lower your tax liability.
This can be a complicated process, but you can make it easier on yourself by keeping accurate records and if needed, working with a tax expert to help ensure you maximize your use of the deduction. Good luck and happy moving!
Do You Have Questions on Deducting Your PCS Expenses?