Business moving expenses for a Home-based LLC Partnership. How and where to enter?

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update: It has been a few days, and my inquiry has had 17,634 Views, yet no answer. It is a topic that many people seem to be interested in. I hope a tax pro can help bring some clarity. Thanks in advance!

We relocated our home and home-based business cross-country to a different state in 2023. The business is a home-based 2-member LLC filing form 1065, and we also file a married filing jointly 1040 where we claim some unreimbursed partner expenses.

We moved our business property and equipment along with our household stuff. Most business and personal property were moved by a moving company, while the most fragile and expensive equipment was moved personally with us on a cross-state trip.

Since a large part of the moving expenses were related to moving our business, can we deduct any of the moving costs and what is the proper way? Arguably we moved more business property than personal, but for tax purposes, we can claim 30% was business and 70% personal.

Option 1: Can we write off 30% of the moving expenses directly as business expenses on our partnership return, form 1065?

Option 2: If option 1 is not ok, can we include moving expenses as unreimbursed partner expenses on our 1040 personal return, by listing them as part of "Other expenses" on line 20 of the "Business use of your home" worksheet?

Option 3: If neither of the above options is right, is there another?

The moving expenses in particular that we have receipts for are:

     a) Moving and Packaging materials

     b) Moving and Storage Company

     c) 2 Hotel stays on the way

     d) Gas pumped on the way

     e) A separate pre-move trip associated with the moving. Namely, plane tickets, car rental, and hotel stay for a trip to inspect the new property a couple of months before the actual moving date. We had to make sure it was suitable for both personal and business use. The move would not have been possible without it, so wonder if we can count this in too.

Any help with figuring things out would be appreciated.

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When it comes to deducting moving expenses for a partnership (in your case, a 2-member LLC filing Form 1065) and for your personal return (1040), there are specific tax rules that govern these deductions. Here’s a breakdown of your options based on your situation:

Moving Expenses Deduction for Partnerships:

1. Business Moving Expenses: Generally, business moving expenses were deductible under the Tax Cuts and Jobs Act (TCJA) for tax years prior to 2018. However, for tax years 2018 through 2025, the deduction for moving expenses is largely suspended for most taxpayers. Only active-duty military members can still deduct moving expenses.

Options for Your Situation:

Option 1: Write Off 30% of the Moving Expenses as Business Expenses on Form 1065

• Not Allowed: Unfortunately, this option is not valid since the ability to deduct moving expenses for businesses is suspended under the TCJA for most taxpayers. Therefore, you cannot directly write off moving expenses as business expenses on your partnership return (Form 1065).

Option 2: Include Moving Expenses as Unreimbursed Partner Expenses on Your 1040

• Not Allowed: Similar to Option 1, moving expenses cannot be deducted as unreimbursed partner expenses on your individual tax return (Form 1040). This means you cannot report moving expenses as “Other expenses” on line 20 of the "Business Use of Your Home" worksheet.

Option 3: Other Considerations

• Alternative Options: Since moving expenses related to business activities aren’t deductible under current tax laws for most taxpayers, you may not have a direct option to deduct these costs. Here are a few things to consider:
  • Capitalizing Costs: If you had significant costs directly related to moving assets for the business, you may have to capitalize those costs as part of your business’s asset basis rather than deducting them as an expense.
  • Impact of Business Structure: If your LLC has changed its classification or structure, you may want to consult a tax professional to evaluate if there are any specific deductions available based on your business structure.
  • Future Tax Law Changes: Keep an eye on future tax changes. Some legislation may alter the current rules regarding moving expense deductions.

Other Expenses to Consider:

• While the moving expenses themselves may not be deductible, any expenses incurred as part of your business operations after the move may be eligible for deduction. For instance, if you had to purchase new supplies or equipment due to the move, those could be deducted as business expenses.

Consultation with a Tax Professional:

Given the complexity and the recent relocation of both your residence and business, it may be beneficial to consult with a qualified tax professional or CPA who can provide tailored advice based on your specific circumstances. They can help ensure that you are in compliance with tax laws while maximizing your deductions.

Summary:

In summary, based on current IRS regulations, the moving expenses incurred related to your partnership and personal return generally cannot be deducted. You will want to discuss this matter with a tax professional to explore any unique considerations for your specific situation.