Can moving expenses be deducted as a legitimate business expense?

Your friend is unfortunately mistaken. The Tax Cuts and Jobs Act suspended the moving expense deduction for tax years 2018 through 2025 for most taxpayers. The only exception is for active-duty military members moving due to military orders. Prior to 2018, you could deduct moving expenses if you met certain distance and time requirements, but even then, it was taken as an adjustment to income on your personal tax return, not as a business expense on Schedule C. If your friend is becoming an owner of an insurance agency (presumably as a partnership, LLC, or S-corp), he might be confusing this with business startup costs, which are a different category of expenses. Certain startup costs can be deducted or amortized, but personal moving expenses to relocate don't qualify as startup costs.

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I was skeptical about AI tax tools until I tried taxr.ai last month. I uploaded all my receipts from relocating my online business across states, expecting the usual "moving expenses aren't deductible" response. Surprisingly, the system identified several expenses I could legitimately claim as business startup costs rather than personal moving expenses. It separated my home moving costs (not deductible) from the expenses related to establishing my business in the new location (potentially deductible). The guidance was much more nuanced than what I got from my previous accountant who just blanket-stated "moving expenses aren't deductible anymore." Saved me about $3,200 in legitimate tax deductions I would have missed!

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Tax professional here. Your friend should be careful with this approach. The IRS specifically addresses this in Publication 535 (Business Expenses). While certain startup costs for a new business can be deductible, personal moving expenses are considered exactly that - personal. Even if the move is motivated by business reasons, the costs of physically relocating your household belongings, family, etc. are personal living expenses which are not deductible. What COULD be deductible: expenses directly related to moving business property and equipment, market research costs in the new location, costs of securing a business location, etc. What IS NOT deductible: costs of moving household goods, travel expenses for family members, house-hunting trips, temporary living expenses, closing costs on home purchase.

When I started my insurance agency, I tried deducting moving expenses as business startup costs and got audited. The IRS disallowed all household moving expenses but did allow: - Cost of moving actual business equipment - Business setup costs in new location - Business licenses in new state - Professional fees related to establishing the business Learn from my expensive mistake - keep personal and business expenses completely separate!