Transportation and Storage Costs Deduction: Eligibility, Expenses, and Tax Implications
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Summary:
Taxpayers were once able to deduct transportation and storage costs related to job relocations, but the Tax Cut and Jobs Act of 2017 altered this provision, with exceptions for active-duty military personnel. This article delves into the intricacies of the transportation and storage costs deduction, eligibility criteria, qualifying expenses, and limitations.
Overview of transportation and storage costs deduction
Taxpayers were once allowed to deduct transportation and storage costs associated with relocating for a job, but the Tax Cut and Jobs Act of 2017 brought changes, except for active-duty military personnel. This article explores the specifics of the transportation and storage costs deduction, including eligibility criteria, deductible expenses, and limitations.
Understanding the transportation and storage costs deduction
In certain situations, the military offers an allowance for move-related transportation, storage, or temporary lodging. If this allowance falls short of covering all costs, the remaining amount can be claimed as a deduction. Any excess allowance should be reported as income by the military on your W-2 or by you on your Form 1040.
The deduction covers transportation and storage costs related to a qualifying move
This encompasses packing and moving household goods, as well as storage and insurance for these items while in transit and for up to 30 consecutive days after removal from your previous residence. Reasonable travel and lodging expenses for you and your household members during the move are also deductible, including driving costs, airfare, tolls, and parking fees.
The deduction for vehicle mileage
If you use your personal vehicle for the move, you can deduct the expense using either the standard mileage rate set by the IRS or by reporting actual expenses such as gas and oil purchases. The standard mileage rate is adjusted annually by the IRS.
Expenses that aren’t deductible
Non-deductible costs include meals while traveling, car repairs, maintenance, insurance, or depreciation. Additionally, expenses must be “reasonable,” and unnecessary side trips or luxury accommodations are not eligible for deduction.
Foreign moves
Unique rules apply when an active-duty service member relocates from a U.S. post or possession to another foreign country or vice versa. In such cases, additional expenses, such as the cost to transport household goods and personal effects to and from storage, are deductible.
Frequently asked questions
Are expenses related to home improvements deductible?
No, expenses related to home improvements are not deductible under the transportation and storage costs deduction.
Can I deduct expenses for return trips to my former posting?
No, costs associated with return trips to your former posting are not eligible for deduction under this provision.
Key takeaways
- The Tax Cut and Jobs Act of 2017 modified transportation and storage cost deductions for job-related relocations, with exceptions for active-duty military personnel.
- The deduction covers various expenses related to a qualifying move, including transportation, storage, and lodging costs.
- Expenses must meet specific criteria to be eligible for deduction, and certain costs are not deductible.
- Special rules apply to foreign moves, allowing for additional deductions for certain expenses.
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