Whether you are moving your business within your state or from state to state, you need to know what's deductible and what isn't.
The 2017 tax law (Tax Cuts and Jobs Act), suspended the deduction for moving expenses, effective with the 2018 tax year and going forward. The only exception is for active military personnel.
For the purpose of this article, business moving expenses can be divided into two parts:
- The business move itself, including the moving of all computers and peripherals, equipment, supplies, furniture, office equipment, inventory, and parts, and
- The move of the owners to a new home, directly related to the move of the business.
Business Moving Expenses and Employees
The moving expenses described in this article are for business owners, not employees. For tax years 2018 through 2025, nonmilitary taxpayers (including any of your employees) can't deduct certain moving expenses. In addition, if you reimburse employees for moving expenses, you must include the amount of those reimbursements as a taxable benefit to the employees.
Business Moving Expenses You May Deduct
The cost of moving business equipment, supplies, and inventory from one business location to another is a deductible business expense, as are costs associated with the purchase or renting of a new location. Be sure to keep good records to substantiate all costs associated with this business move.
Personal Moving Expenses to Start a New Business
Is your move is part of the process of starting a new business as a self-employed business owner? If so, you can deduct your personal moving expenses if you meet IRS guidelines. To be classified as self-employed, you can't be the owner of a corporation, semi-retired (whatever that means), a part-time student, or work only a few hours each week.
First, your personal moving expenses must be "directly related" to a business move.
Second, you must pass both of these two IRS tests: the "distance test" and the "time test."
- The distance test. To pass the distance test, the IRS says, "your new main job location [must be] at least 50 miles farther from your former home than your old main job location was from your former home." So, let's say your former home was Canton, Ohio and you traveled 5 miles to get to your business. Your new business location must be at least 55 miles from Canton, Ohio, in order for you to deduct moving expenses.
- The time test. To deduct personal move expenses for a self-employed person, you must work full-time at least 39 weeks during the first 12 months, for a total of at least 78 weeks in the first 24 months. Note that the work must be "full time," depending on what is usual for your type of business in your area. For example, most dentists work four days a week, so that would be considered as the full time for moving expense deduction purposes.
Mileage associated with the business portion of your move is paid at the applicable mileage rate for that year for business travel.
What You May Not Deduct as Business Moving Expenses
You may not deduct moving expenses that are not directly related to the move of your business, and you may not deduct personal moving expenses that do not meet the IRS distance or time test.
The IRS regulations do not allow you to take a moving expense deduction and a business expense deduction for the same expenses. The IRS says,
"You must decide if your expenses are deductible as moving expenses or as business expenses. For example, expenses you have for travel, meals, and lodging while temporarily working at a place away from your regular place of work may be deductible as business expenses if you are considered away from home on business."
Highlight these expenses for discussion with your tax advisor.
Meals are not deductible as a moving expense unless you can provide documentation that they were directly associated with the business move rather than your personal moving expenses. For example, if you followed the van carrying your business equipment to its new location and you directed the unloading, you may be able to deduct the costs associated with that trip as a regular business travel expense, including lodging and meals.
You may not deduct personal move expenses if you do not move within one year from the date you began work at the new location unless you can show that you were prevented from moving during that time.
This article and all information on this site presents general information and is not intended to be tax or legal advice. Refer to IRS publications for more details. Each situation is specific; refer questions to your tax advisor.