2019 Edition: Are Moving Expenses Tax Deductible? Moving & Home Tax Advice

Spring is the perfect time to reflect on the past year and look forward to the new…and it’s also a great time to start thinking about how a recent move or past home improvements could save you money in 2019. Tax season is officially in full swing, and if you want to turn deductions into dollars-saved, you’ll want to check out these five tips for taking home investment tax deductions.

Whether you’ve recently moved, renovated, sold or bought a house, or are just renting, here’s what you need to know about deducting expenses and investments from your 2018 taxes.

If You’ve Moved Recently: Can I Deduct Moving Expenses?

Moving can be a pain, and costs associated with it can be, too. In the past, you’ve been able to recoup some of that cost through taxes, but starting with 2018 taxes, that’s not an option.

“Previously, you could deduct costs of moving for work if it met certain requirements,” explains DollarSprout’s Virtual CFO Ben Watson. “You’re no longer allowed to deduct costs for moving except for certain circumstances in the military.”

That means moving for work is now a more expensive task–even more reason to negotiate your relocation expenses when accepting a job.

However, those relocation expenses now can’t be deducted, CPA Logan Allec explains. “Under the old tax law, taxpayers who were reimbursed by their employers for moving expenses did not have to include the amount of the reimbursement in their income (and these amounts were deductible for the employers making the reimbursement). Now, these amounts must be included in income (and these amounts are no longer deductible for the employers making the reimbursement).”

If You Work From Home: How Do I Deduct Home Business Expenses?

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Prior to the Tax Cuts & Jobs Act, employees who worked from home could deduct business expenses from a home office (like a portion of utilities, insurance, and business equipment) in their taxes. Starting with your 2018 taxes, that’s changed.

“If you are a remote employee that works from home, and receive a W-2 (not a 1099), you are not allowed to deduct expenses from your home or unreimbursed expenses paid out of pocket for your job,” according to Watson. The key here is the unreimbursed expenses. It’s more important now than ever to get those expenses reimbursed so they can be deducted.

This also means the rules now differ between employees and the self-employed: self-employed workers, like freelancers, are allowed certain deductions that work-from-home employees aren’t. CPA Riley Adams explains, “Now, only self-employed workers may claim the home office tax deduction. They may choose the standard method of the simplified method. The former allows for the full tally of expenses to be claimed in their actual amount, whereas the later takes a square footage amount dedicated to your home office and multiplies it by $5 per square foot.”

If You Renovated Your Recently Sold Home: Are Home Improvement Expenses Tax Deductible?

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Remember when your significant other questioned your decision to expand the upstairs with that master suite addition a few years ago? It’s time to bask in glory and find a way to politely say “I told you so!” Not only did you get to enjoy all that luxurious space plus an en-suite bathroom, but now that you’ve sold your home, the investment you made could also pay off in a big deduction.

Of course, not all the work on your home is considered a home improvement by the federal government. Basic maintenance and repairs that merely return your home to its original condition and functionality don’t qualify for this deduction. Capital improvements—or home improvements that you can deduct from your taxes—must increase your home’s value and usefulness. If you’ve finished a basement, added a bathroom, remodeled a kitchen, installed new plumbing or a new fireplace, replaced your roof (it was high time, wasn’t it?) or built a swimming pool, these improvements can be deducted, though only after you sell your home.

If you’re not sure if your new windows and landscaping count (they might), or if you can deduct the palatial dog house you built for your pup (Magic 8-Ball says “Not likely”), you can first review IRS Publication 523, which lists eligible examples, or read about what home improvements are tax deductible. If you’re still in doubt you can also consult a tax accountant.

If You Purchased a Secondary Home: Are There Deductions for Vacation Homes? 

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With moving behind you, you can think about the deductions you may be able to take for mortgage interest, mortgage insurance premiums, and real estate taxes. These deductions are itemized on Form 1040, Schedule A, Itemized Deductions (PDF), and if you have questions (who wouldn’t?), IRS Publication 17, Chapter 23 is there for you…just some light reading to help you fall asleep at night.

Did you take the big plunge and purchase a second home or a vacation home recently? It may deliver more mortgage interest and property tax deductions for you. If you rented your second property for 14 days or less per year, you can deduct those taxes. If you rented for longer than the 14-day annual limit, the IRS counts this home as an income property, and you won’t be able to take these deductions. (But on the plus side, you probably have an awesome Airbnb!)

If You’re a Renter or a Landlord: What Income Tax Deductions Are Available for Renters?

Whether you’re a landlord or a renter, you may have some options for taking tax deductions in 2018. Homeowners with a rental property can deduct utilities, taxes, and property repairs, not to mention services like a property manager’s salary or house cleaners’ wages. Be sure to file Form 1099-MISC if you paid a contractor $600 or more over the year (and include their tax ID number), though you can deduct this expense regardless of the amount. See what other deductions landlords can take.

If you’re renting, there are a few federal tax deductions renters can take:

• Did you pay property taxes as part of your rental lease agreement? Claim these as a deduction.
• Have any property losses or damage (e.g. from fire, theft, flood, etc.)? Claim them if you didn’t already receive reimbursement from your insurance provider.
• Any expenses related to your home office? Claim them if you worked from your rental home (but only if you’re self-employed–see the section above for details). 

Some states also offer state income tax deductions for rent expenses. Here are a few examples:

• California renters can receive the Nonrefundable Renter’s Credit, provided they meet income requirements and other qualifications.
• Certain Pennsylvanian renters may qualify for the income- and age-based Property Tax/Rent Rebate Program. Renters age 65+, widows/widowers age 50+, and people with disabilities age 18+ who make less than $15,000 a year may be eligible for a $500 or $650 refund.
• Maryland renters who applied for the income-based Renters’ Tax Credit Program by September 1st of last year may be eligible for a credit of up to $1,000.

Take all the deductions you can, while you can. The tax code is constantly changing, so take advantage of deductions while they’re around. And if you are looking ahead to a big move or home purchase this year, here’s a different kind of tip: book a Dolly for affordable, on-schedule moving and delivery help. We can’t make your taxes easy, but we can make your move simpler.