Certified Relocation Professional (CRP) Practice Exam

Can an employee deduct shipping costs and temporary living expenses on their federal income tax return after relocating for work?

1. May not deduct either because they are a new hire

2. May deduct temporary living expenses only

3. May deduct shipping costs but not temporary living expenses

4. May deduct both if itemized on tax return

The correct answer is: May deduct shipping costs but not temporary living expenses

After the Tax Cuts and Jobs Act of 2017, the ability for employees to deduct moving expenses has been significantly limited. As a general rule, most taxpayers can no longer deduct moving expenses unless they are active members of the Armed Forces moving due to a military order. However, for those who qualify, the rules permit the deduction of certain expenses related to the move. In the context of the question, the correct response indicates that shipping costs are deductible but not temporary living expenses. This aligns with the current tax code where, under specific circumstances, taxpayers can deduct the costs associated with the transportation of their belongings, namely shipping costs, when relocating for work. Temporary living expenses, such as hotel stays or meals during the transition, typically do not qualify for deduction under current tax regulations. Understanding the specifics of the tax code post-2017 illustrates why the deduction of shipping costs is acknowledged while temporary living expenses do not qualify, reflecting the nuances that have been introduced in recent tax reforms.