Relocating for work can be a pivotal step in advancing your career, but it often comes with significant financial considerations. While the ability to deduct moving expenses on federal tax returns has largely been curtailed for most taxpayers, exceptions remain—especially for members of the Armed Forces. Let’s break down who qualifies, what’s covered, and how military personnel can maximize their benefits.
Are Moving Expenses Tax-Deductible for Everyone?
Before 2018, most taxpayers could deduct certain moving expenses if their move met specific distance and time requirements. However, the Tax Cuts and Jobs Act of 2017 (TCJA) suspended this deduction for tax years 2018 through 2025. This change applies to most employees and self-employed individuals, making expenses such as packing, hiring movers, travel costs, and temporary housing no longer deductible.
Military Relocation: An Exception to the Rule
For members of the military, the financial burden of moving is eased significantly under specific conditions. Service members ordered to relocate due to a Permanent Change of Station (PCS) are eligible for reimbursements and tax benefits not available to civilians. A PCS can include moves:
- Between duty stations.
- From your last duty station to your retirement location.
- Overseas and within the U.S.
What Expenses Are Covered for PCS Moves?
Active-duty military members relocating under a PCS can expect the government to cover or reimburse several moving-related expenses, including:
Household Goods Shipment
The government covers the cost of transporting household goods, typically within weight limits based on rank and family size.
Temporary Storage
Fees for storing goods for up to 30 days before or after a move are generally reimbursed, providing flexibility in coordinating new housing arrangements.
Travel Expenses
Costs associated with travel for the service member and their dependents—including mileage and authorized per diem rates—are covered.
House Hunting Trip
One authorized trip to find housing may be reimbursed, enabling a smoother transition to your new location.
Expenses Not Covered for Military Moves
Despite generous support, certain costs remain the responsibility of service members:
- Meals During the Move: While travel costs are reimbursed, meal expenses are not.
- Home Transactions: Buying or selling a home, including realtor fees and closing costs, are out-of-pocket expenses.
- Extended Temporary Lodging: Costs for housing beyond the government’s per diem allowances may not be covered.
- Storage Beyond Limits: If you exceed the authorized timeframe for storage, you’ll incur additional expenses.
Tax Benefits for Military Members Beyond Moving Expenses
Active-duty service members enjoy unique tax benefits beyond those tied to relocation. These include:
- Combat Pay Exemption: Income earned in hazardous duty areas is exempt from federal income tax.
- Reservist Travel Deductions: Travel and lodging costs for reservists traveling over 100 miles for duty may qualify as deductions.
- Disability Benefits: Some military retirees can exclude part of their retirement income from federal taxes.
- Education Benefits: GI Bill payments and similar education programs are not taxed.
What About Civilians?
If you’re a civilian moving for work, you’re unlikely to benefit from tax deductions under current laws. However, some employers offer relocation assistance packages that may include tax-free reimbursements. For example, an employer might cover moving company fees, travel, or temporary housing as part of your job offer.
Tips for Military Members Maximizing PCS Benefits
- Plan Early
Keep track of receipts and documentation to simplify reimbursements and deductions. - Understand Regulations
Familiarize yourself with the Joint Travel Regulations (JTR) to know what’s covered and the limits of government support. - Use Free Resources
Take advantage of programs like Military OneSource, which offers free tax preparation services tailored for military families. - Seek Professional Advice
Military tax laws can be intricate. Consulting with a tax professional ensures you maximize your benefits and avoid costly mistakes.
Supporting Service Members
The government’s robust financial support for PCS moves reflects its commitment to alleviating the financial strain on military families. Understanding your entitlements and leveraging available resources ensures a smooth relocation process while minimizing financial stress.
Whether you’re an active-duty service member or a civilian navigating moving expenses, staying informed is critical. For military personnel, careful planning and professional guidance can make all the difference in taking full advantage of these well-deserved benefits.
By partnering with a CPA or tax professional experienced in military finances, you can confidently manage the complexities of relocation and tax planning, ensuring your move sets you up for success both personally and financially.