Is it Possible to Claim Moving Expenses for Going Back to School

Nov 02, 2022 By Triston Martin

In the past, taxpayers who moved for job purposes and met two requirements (the time test and the distance test) may deduct moving costs. You might have been eligible if you planned to work while studying in a foreign country. On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), which radically altered the tax code. Except for members of the armed forces who are required to relocate because of orders, the TCJA did away with the above-the-line tax deduction for moving expenditures. This deduction is no longer available to taxpayers after the tax year of 2018.

Past Tax Returns for Deduction Purposes

Yet, if you moved in 2017 and are eligible for a moving expense deduction, you can still include those charges on your 2016 federal tax return. To do so, file Form 1040-X to modify your previously filed tax return for the tax year 2017 to reflect the adjustments you wish to make.

Generally, you have three years from the original filing deadline to file an updated return to claim a credit or refund. You have until April 15, 2021, to file an updated return for a credit or refund if you missed the original deadline of April 15, 2018, to file your 2017 tax return.

The Time and Distance Tests

In years where it was possible, claiming a moving expense deduction on your tax return required that you meet two criteria. The first was the "distance test," which stipulated that taxpayers must relocate at least 50 miles further from their previous residence than the distance between their last residence and their new place of employment. That is, if you were previously commuting 10 miles to work, your further commute distance could not be less than 60 miles.

For the time test to apply, a taxpayer must work a full-time job for at least 39 weeks in the 12 months after the transfer. If you were self-employed, you must work full-time for at least 78 weeks within the 24 months following your move.

If you are married and file a joint tax return, any one of you need only pass the labour test to deduct the costs. The Internal Revenue Service gave you a year after your transfer to complete this requirement. The preceding procedure for filing an amended return applies even if you failed to deduct your moving expenditures on your 2017 return but afterwards passed the time test.

To qualify for this deduction in 2017, you must satisfy both requirements.

The Impact of Those Regulations on Students

Before the tax year 2018, students could deduct moving costs if they met the distance and time requirements. To rephrase, as long as you had a job waiting for you when you arrived and weren't just going to school. To go to school while working full-time is not against the rules. It was plenty if you worked the equivalent of a full-time schedule.

A graduate student attending classes part-time may, for instance, be self-employed or maintain another full-time job. Because of that, they would have been eligible for the rebate. However, the deduction would be nullified if they only worked part-time.

Specifically, the date of the migration should be kept in mind as the most important date. If you moved in December 2017 between semesters and worked a full-time schedule for 39 weeks in 2018, under the prior rules, you could deduct your moving costs from your taxable income for 2017. That's because the IRS provided you a full year after your move to prove that you've lived in the new location.

If a student's schedule doesn't permit full-time employment, self-employment may be an option if they meet the criteria for independent contractors. This would allow them to work when it suited them, even if it wasn't during regular business hours.

Back-To-School Tax Tips

The first day of school is so close now, and it's crazy. recommends the following strategies for the current academic year to maximise tax benefits associated with higher education.

1. Tax Deductions for Before and After School Programs

Taxpayers may be eligible for a tax credit if they pay for before- or after-school care for kids younger than 13 years old.

2. Fundraising Events For Schools Do Not Qualify For A Significant Tax Deduction

If you obtained goods or services in exchange for your donation, the fair market value of those items must be subtracted from your deduction.

3. College Moving Expenses Are Not Deductible

Regarding itemising deductions, the IRS does not consider relocating costs associated with attending college elsewhere legitimate. However, your costs may qualify for the moving expense deduction if you're moving for your first job after graduation.

4. Income from Section 529 Plans Is Exempt From Federal Taxes.

Gains from 529 programmes are not taxable. As long as the funds are used for qualified higher education costs, the investment growth and withdrawals will be free of taxation.

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