Prior to the 2018 Tax Cuts and Jobs Act (TCJA), taxpayers could deduct moving expenses if they relocated for work reasons and met two requirements: the time test and the distance test. If you intended to work in addition to attending school somewhere far from home, you might have qualified. But as of 2018, there is no more tax deduction for moving expenses unless you are an active-duty military member who must relocate due to military orders.
Deducting Moving Expenses on Prior-Year Returns
If you relocated for work prior to 2018, you likely qualified for a moving expense tax deduction. If you did not claim it back then, you could have claimed it by amending your federal tax return for that year (2017 or earlier). To do so, you would have needed to make changes to your filed return by using Form 1040-X to file an amended tax return within three years. You’re probably thinking that it’s too late to file an amendment, and you’re right. To receive a credit or refund for a moving expense in 2017 (the last year with this tax deduction), you would have had to file the amendment by April 15, 2021.
The Distance and Time Tests
When the moving expenses tax deduction was possible, your move had to pass two tests in order to be eligible to claim it, even for prior-year tax returns. The first was the distance test, which required that taxpayers move at least 50 miles away from their old workplace and home. So if your old home was 10 miles away from your old workplace, your new workplace would need to be at least 60 miles away in order for you to move and deduct those moving expenses. Under the time test, a taxpayer needed to work full-time for at least 39 weeks during the 12 months following the move. If you were self-employed, you had to work full-time for at least 78 weeks in the 24 months after your move. If you were married and filed a joint return, either spouse could meet the work test, and the expenses would still have been deductible. The IRS allowed 12 months from the time of your move to meet this test. If you didn’t deduct your moving expenses on your 2017 return when you filed in 2018, but later met the time test, you could still file an amended return as described above. You would have had to meet both these tests to qualify to claim this deduction for the 2017 tax year.
How the Moving Expenses Deduction Affected Students
Students could claim the moving expenses deduction for tax years before 2018 if they met both the distance and time tests, just as anyone else. In other words, as long as you worked at your new location and didn’t only attend school, then you qualified to deduct moving expenses on your tax return. There was no rule that says you couldn’t also attend school in addition to working full time. You simply needed to meet the requisite number of full-time work hours. For example, a part-time grad student might have had a full-time day job or worked full-time as an independent contractor while in school. That would have qualified them for the tax deduction. But if they work just part-time, they couldn’t claim it. Remember that the pivotal date was when the move occurred. For example, if you relocated between semesters in December 2017, and if you were able to arrange your schedule to work full time for 39 weeks in 2018, you would still have qualified for the moving expenses deduction for the 2017 tax year. That’s because the IRS gave you 12 months from the time of your move to meet the time test. For students whose class schedule didn’t allow for full-time work, one solution was to start their own consulting or freelance business so that they could have the flexibility to work around their school hours, as long as they met the requirements for self-employed workers.
Additional Tax Break Options for Students
If you’re a student, you still have some options for tax breaks, such as the Lifetime Learning Credit and the American Opportunity Tax Credit. Estimate your tax obligation in conjunction with either of these credits. You might realize that you’re actually better off claiming one over the other, and it may work out that you save more on taxes than you would if the moving expenses deduction was still available.
