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IRS WATCH - Most people assume moving expenses are no longer tax-deductible, and for the majority of taxpayers, that's technically true.
The Tax Cuts and Jobs Act of 2017 suspended the moving expense deduction for most taxpayers through 2025.
However, several significant exceptions remain, and many people overlook adjacent deductions that apply before, during, and after a move.
More importantly, understanding the full tax landscape of relocation can inform better financial planning around your move timing and strategy.
Who Can Still Deduct Moving Expenses
Active-duty military members moving due to permanent change of station orders remain fully eligible for moving expense deductions. This is the primary exception that survived the 2017 tax reform, and it's surprisingly comprehensive.
Qualifying military moves allow deductions for transportation costs, lodging during the move, storage costs for up to 30 days, and even shipping costs for vehicles and pets. The deduction covers not just the service member but their entire household. Many military families leave thousands of dollars on the table by not tracking these expenses properly.
The key requirement is that the move must be due to a military order for permanent change of station. Temporary duty assignments don't qualify, but most PCS moves do, including relocations upon retirement or separation if the move occurs within one year of ending active duty.
Self-employed individuals relocating for business purposes may also qualify under specific circumstances, though the rules are more restrictive. The move must be closely related to the start of work at a new business location, and you must meet both a distance test and a time test.
The distance test requires that your new workplace be at least 50 miles farther from your old home than your previous workplace was. The time test requires working full-time for at least 39 weeks during the 12 months following your move (78 weeks during 24 months for self-employed individuals).
Home Sale Tax Exclusions: The Biggest Opportunity
The capital gains exclusion on home sales represents the largest tax benefit associated with moving, yet many people fail to optimize it or assume they don't qualify.
Single taxpayers can exclude up to $250,000 of capital gains from the sale of their primary residence, while married couples filing jointly can exclude up to $500,000. This exclusion applies if you've owned and lived in the home as your primary residence for at least two of the five years before the sale.
Here's what people miss: you don't need to have lived in the home for the two years immediately before the sale. As long as you meet the two-year threshold within the five-year window, you qualify. This creates strategic planning opportunities.
If you're considering a move and your home has appreciated significantly, timing the sale to qualify for this exclusion can save $50,000 to $100,000 or more in federal taxes alone. Conversely, selling too early can cost you this entire benefit.
Partial exclusions exist for people who don't meet the full two-year requirement due to job changes, health issues, or unforeseen circumstances. Even a partial exclusion can save substantial money. Many taxpayers don't realize they qualify for these exceptions and pay unnecessary capital gains taxes.
Mortgage Interest and Property Tax Implications
Moving affects your mortgage interest and property tax deductions in ways most people don't anticipate. Understanding these implications can save money and inform smarter timing decisions.
If you own homes in two locations simultaneously during a transition period, you may be able to deduct mortgage interest on both properties, subject to the overall limits on mortgage interest deductions. The key is that both homes must qualify as residences—your primary residence and one second home.
This becomes particularly valuable if you need to purchase your new home before selling your old one. For several months, you might deduct mortgage interest on two properties simultaneously, significantly reducing your tax burden during an expensive transition period.
Property taxes are deductible up to $10,000 annually for state and local taxes combined (or $5,000 if married filing separately). When you own two homes simultaneously, you can allocate this deduction across both properties, potentially maximizing the benefit during your transition period.
Many people also miss the opportunity to deduct points paid on a new mortgage. If you purchase a home in conjunction with your move, points paid to secure your mortgage are generally fully deductible in the year paid for a primary residence purchase. On a $400,000 mortgage, one point equals $4,000—a substantial deduction.
Refinancing your existing mortgage before a move can also create deductions. Points paid on a refinance must typically be deducted over the life of the loan, but if you're planning to move and sell within a few years, this accelerates the deduction timeline.
Charitable Contribution Opportunities
Moving creates excellent opportunities for charitable contributions, and these deductions remain fully available to taxpayers who itemize.
The IRS allows deductions for fair market value of donated items. Moving is the perfect time to donate clothing, furniture, household goods, and other items you no longer need. Working with trusted movers like Zeromax Moving and Storage can help you identify items that might cost more to move than they're worth, making them ideal donation candidates.
The key is proper documentation. For donations over $250, you need written acknowledgment from the charity. For donations over $500, you must file Form 8283 with your tax return. For donations over $5,000, you generally need a qualified appraisal.
A household clearing out before a move might reasonably donate $3,000 to $8,000 worth of items, creating substantial deductions for itemizers. Software and apps exist specifically to help value donations and generate proper documentation.
Overlooked Deductions Before and After the Move
Several expenses surrounding a move may be deductible even when moving expenses themselves aren't.
Home improvements made to sell your property aren't immediately deductible, but they increase your cost basis in the home, reducing capital gains. Major improvements like kitchen remodeling, room additions, or system upgrades made within a few years of selling should be carefully documented.
Similarly, selling costs, including real estate commissions, legal fees, title fees, and transfer taxes, reduce your capital gains. These aren't deductions per se, but they reduce your taxable gain, which amounts to the same benefit.
Investment property sales follow different rules from primary residences. If you're moving and selling a rental property, a 1031 exchange allows deferring capital gains by reinvesting in another investment property. This requires careful planning and adherence to strict timelines.
Medical expense deductions remain available if your total medical expenses exceed 7.5 percent of your adjusted gross income.
For people moving due to health reasons or those with significant medical expenses, some moving-related costs might qualify if the move is primarily for medical care.
Documentation and Record-Keeping
Regardless of which deductions you pursue, proper documentation is essential. The IRS requires contemporaneous records—documentation created at the time expenses occur, not reconstructed later.
Maintain detailed records of all move-related expenses, even those you don't expect to deduct. Tax laws change, and having documentation allows you to claim deductions if opportunities arise.
For home sales, keep records of your original purchase price, all capital improvements, and all selling expenses. These documents support your capital gains calculation and exclusion claim.
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