Moving expenses refer to the costs incurred when relocating to a new home. Prior to 2018, taxpayers were allowed to deduct eligible moving expenses from their federal income taxes. However, as of January 1, 2018, the federal tax deduction for moving expenses has been eliminated for most taxpayers.

Some states, such as Arkansas, California, Hawaii, Massachusetts, Minnesota, New Jersey, New York, and Pennsylvania, have adopted their own laws to welcome people to move to their states by allowing deductions for moving expenses. These state tax deductions vary in terms of eligibility requirements and the types of expenses that can be deducted. This post will concentrate on California laws.

According to California instructions, you can deduct expenses for “moving household goods and personal effects, and travel”. The following expenses are eligible for deduction:

  • Packing, crating, in-transit storage, and insurance
  • Shipping
  • Truck rental
  • Moving company
  • Airfare
  • Luggage
  • Lodging associated with the move
  • Car miles at 18 cents per mile (22 cents a mile after June 30, 2022)

The following expenses are not eligible for deduction:

  • Food
  • Buying new furniture
  • Return trips to your former residence
  • Temporary lodging after move

All unreimbursed qualified moving expenses are deductible. However, if your expenses are reimbursed, things can get more complicated. Here are the three types of reimbursements:

  • Lumpsum: The company gives you a fixed amount, and you can decide how to spend it. If you use part of the lumpsum for qualified moving expenses, only that portion is deductible. The company must add the lumpsum to your W-2 to ensure proper tax treatment.
  • Reimbursed and added to your California income in box 16 of your W-2: If your employer reimburses you for qualified moving expenses and adds it to your California income, you can still claim the expenses as a deduction on your California state tax return, because you are not required to pay tax on the qualified moving expenses, reimbursed or not.
  • Reimbursed and not added to your California income in box 16 of your W-2: If your employer reimburses you for qualified moving expenses and does not add it to your California income, you cannot claim the expenses as a deduction because the amount is not included in your income in the first place.

If you have a complex situation, you may need to analyze each of your expenses. For more information on California moving expenses, see the FTB instructions.