Moving Expenses

[fkhalilz]

Hello,

My wife and I are retired. Our main business activity involves 5 rentals (2 in Texas and 3 in California). We sold our home and the 2 rentals in Texas and moved to California in 2021. So this is not an employment related move, but it is a business related move to better manage our rentals in California.

Elsewhere, in previously answered questions by TT Community, I read that moving expenses have been suspended until 2025 (except for military folks). Is this still true? Is there any option for me to deduct any of my moving expenses?

Thank you!

[xmasbaby0]

https://ttlc.intuit.com/questions/4482873-which-federal-tax-deductions-have-been-suspended-by-tax-re...

Per the tax laws that changed for 2018 and beyond, moving expenses are not deductible on a federal return except for certain active duty members of the military.

There are several states that allow a deduction for moving expenses on the state return:  AZ, AR, CA, HI, IA, MA, MN, NJ, NY, PA and VA  You can enter your moving expenses in the federal software and the information will flow to your state return.

[fkhalilz]

Thank you for your response.

I understand that Moving expenses in our case would be deductible only in our new state, i.e. California. But before I enter the data into TT, is managing our rentals in California a legitimate moving expense from California state tax point of view? What do I need to justify this claim?

Thank you!

[JohnW152]

No, it’s not a legitimate reason for claiming the moving expense on your California return.  The move must be related to your workplace when you’re either an employee or self-employed.

According to Who Can Deduct Moving Expenses -- Non-military Members in the 2021 Instructions for Form FTB 3913, Moving Expense Deduction:  

If you move to a new home because of a new principal workplace, you may be able to deduct your moving expenses whether you are self-employed or an employee.  

[Bolding mine.]

See also What About Moving Expense Deductions? in New To California for more information.

[fkhalilz]

According to FTB 3913, the time test for self employed folks is:

If you are self-employed, you must work full time in the general area of your new workplace for at least 39 weeks during the first 12 months and a total of at least 78 weeks during the 24 months right after you move.

So according to this test , I am not eligible to deduct my moving expenses because the hours I spend at my job as manager of my rentals is unpredictable. So is this the reason I cannot deduct my moving expenses in my California state return?

Thank you!

[ErnieS0]

Possibly. As Tax Expert @JohnW152 said your move must be related to your workplace. You said your move was not work related. Additionally, if you are not a self-employed rental manager (filing Schedule C) the you would not be self-employed.

TurboTax will not add your moving expenses if you said you did not meet the time test.

[fkhalilz]

Just to be clear, I never said that our move was not work related. In fact I said the opposite. As reproduced below from my opening statement, we moved to California to better manage our rentals there. Here is what I said again:

My wife and I are retired. Our main business activity involves 5 rentals (2 in Texas and 3 in California). We sold our home and the 2 rentals in Texas and moved to California in 2021. So this is not an employment related move, but it is a business related move to better manage our rentals in California.

So given this clarification, does it make any difference in claiming moving expenses? If we still cannot, I'd like to make sure I know the reason. Is it the time test, not filing schedule C, both, or something else?

Thank you!

[JillS56]

Currently moving expenses for an individual cannot be deducted.  This  deduction was suspended with the 2017 Tax Cuts and Jobs Act.   If you are self-employed and file a Schedule C you can still deduct moving expenses related to business assets.

In summary, unless you are self-employed and file a Schedule C and the moving expenses are business related, then you cannot currently deduct moving expenses.

I hope this clarifies the current rules on moving expenses.

[fkhalilz]

Thank you for that clarification.

One question: Did everything you say in the summary apply to both Federal taxes and State of California taxes? In other words, does state of California have the same requirements as the federal government for being eligible to claim moving expenses?

Thank you!

[DMarkM1 · Accepted solution]

The rules for CA are the same.  You must be employed or self-employed.  If self-employed there would be a Schedule C.  Rental income is not self-employment income it is considered passive income even as an active participant.  If you are a real estate professional you would be filing a schedule C for example and that income would be subject self-employment taxes.  Rental income is not.     

Here are the instructions for FTB Form 3913.   See page 1 paragraph B. 

[Scott-1338]

I am doing a friend's taxes for their elderly mother.  The mother had to move from NM to CA and they incurred roughly 3K of expenses to move her and her belongings.  Is it deductible and how do I do it on Turbo-Tax

Thanks,

Scott

[xmasbaby0]

@Scott-1338 No, the moving expenses are not deductible on a federal return.   On a federal tax return only certain active duty members of the military can deduct moving expenses.  Some states will allow a deduction for moving.

https://ttlc.intuit.com/questions/4482873-which-federal-tax-deductions-have-been-suspended-by-tax-re...

Per the tax laws that changed for 2018 and beyond, moving expenses are not deductible on a federal return except for certain active duty members of the military.

There are several states that allow a deduction for moving expenses on the state return:  AZ, AR, CA, HI, IA, MA, MN, NJ, NY, PA and VA  You can enter your moving expenses in the federal software and the information will flow to your state return.