Transportation and Storage Costs: An Overview
Through 2017, American taxpayers were allowed to deduct transportation and storage costs when relocating for a job. The Tax Cut and Jobs Act of 2017 eliminated this deduction, except for active-duty military personnel.
To take the deduction, the member of the military must be relocating due to a military order resulting in a permanent station change. This includes moving from home to a first active-duty post, from one permanent post to another, and from a last post back home or to a closer location within the U.S.
Costs related to moving household members are also covered. A person is considered to be a member of the household if both the former and the new home are his or her main residence.
If you qualify for the deduction, you can complete Internal IRS Form 3903, Moving Expenses.
Understanding the Transportation and Storage Costs Deduction
In some cases, the military provides an allowance for move-related transportation, storage, or temporary lodging. If the allowance does not cover the full costs, the remainder can be claimed as a deduction.
If the allowance provided exceeds actual moving-related costs, the additional money should be reported as income by the military on your W-2. If not, you should report it as income on your Form 1040.
The deduction covers transportation and storage costs related to a qualifying move. This includes packing and moving household goods and personal effects as well as storage and insurance for these items while in transit and for up to 30 consecutive days after they are removed from your previous residence.
Reasonable travel and lodging costs for you and your household members moving from your old home to your new one are also deductible. This includes driving expenses, airfare, tolls, and parking fees.
The Deduction for Vehicle Mileage
If you use your personal vehicle for the move, you can deduct the expense in either of two ways: by using the standard mileage rate set by the IRS or by reporting actual expenses such as gas and oil purchases.
If you are planning to deduct your actual expenses, be sure to keep every receipt and log your mileage. If you're using the standard mileage rate, you need only keep a log of your mileage.
The standard mileage rate is revised every year by the IRS. For the 2020 tax year, the rate is 17 cents per mile. For 2021, it is 16 cents per mile.
Expenses That Aren't Deductible
Costs that are not deductible include meals while traveling or car repairs, maintenance, insurance, or depreciation.
Also, keep in mind that costs must be "reasonable." Unnecessary side trips and luxury accommodations are not deductible.
Costs related to your move that are not involved with the transport of yourself and your possessions are not deductible, including expenses related to buying or selling a home, home improvements, security deposits, or return trips to your former posting.
Special rules apply when an active-duty service member moves from a post in the U.S. or one of its possessions (such as Puerto Rico, U.S. Virgin Islands, Guam, or American Samoa) or from one foreign country to another foreign country.
In this case, additional expenses can be deducted, including the cost to transport household goods and personal effects to and from storage and the cost to store these items for all or a part of the time your main job location is in a foreign country.
Moving from a foreign country to the U.S. or one of its possessions does not qualify as a foreign move.