Save those receipts when you’re making a permanent change-of-station move this year: You can still deduct qualifying moving expenses that weren’t reimbursed by the government.
Don’t include any expenses that were reimbursed by an allowance that you don’t have to include in your income. You can’t deduct expenses that include the costs of side trips, for instance, such as for sightseeing or visiting relatives along the way.
Why you may want some extra protection in case your military move goes wrong.
The qualifying moving expenses include traveling — lodging, not meals — to the new home, and moving household goods and personal effects. For example, you can deduct the costs of shipping a car or household pets to a new home if those costs weren’t paid for or reimbursed by the government. Use IRS Form 3903, “Moving Expenses,” to file for these deductions.
STATE TAX DEDUCTION DROPPED
Another change in the tax law reduces the amount of state and local taxes that can be deducted from your federal taxes, limiting the amount that can be deducted to $10,000. For some, that limited deduction could mean they pay more in federal taxes.
“For the clients we typically see in [military] tax centers, I don’t think there will many affected who are on active duty, because of our income,” said Army Lt. Col. David Dulaney, executive director of the Armed Forces Tax Council. “Typically states tax no more than 6.5 percent of your gross income for the year, so you’d have to make over $150,000 to even get close to the $10,000 cap.”
This may have more of an effect on members of the Guard and Reserve with civilian jobs, he said. It’s also unclear what it might mean for service members on the move: A number of domicile states for service members and their spouses don’t have state income taxes, and under the Servicemembers Civil Relief Act, the military income of the service member and income of the spouse may not be subject to taxation by multiple states. The spouse must meet certain residency requirements.
The SCRA also exempts active duty and spouses from paying taxes on personal property, such as cars, in any state other than their state of legal residence.