A military permanent change of station (PCS) uproots military members and trailing spouses every two or three years and ships them across the country or overseas. While expenses involved in such a move are mostly paid by the military, a military member with extensive belongings or problems during the PCS move may have some out-of-pocket expenses as well, which are usually tax-deductible.
The military provides transferring personnel with a cash PCS allowance before the move. If this money is completely used in the course of the move, it is not counted as income and you do not have to report it. Allowable moving expenses include all do-it-yourself moving costs related to actually moving your household as well as your dislocation allowance, temporary lodging expense and allowance, and move-in housing allowance. If your allowances are not counted as wages and they exceed your costs in any other category, that sum must be included in your income tax filing as gross income.
Unreimbursed expenses for moving household goods and for travel expenses may be deducted from your taxes if all other rules are met. All these expenses must be incurred due to your situation at the time of the move's initiation; for example, if you buy furniture while you are in transit and have it delivered, you may not deduct the cost of delivery. Deductible travel expenses include unreimbursed but reasonable lodging expenses and your out-of-pocket, unreimbursed costs of expenses like gas and tolls. You may also deduct a mileage rate of 16.5 cents per mile, as of 2010; since this rate changes frequently, refer to the instructions in IRS Form 3903 for current rates. For an overseas PCS, storage fees and related costs may also be deductible. Unlike civilians, military members do not have to meet IRS time and distance tests; qualified unreimbursed out-of-pocket expenses are always deductible for eligible members.
Deductible PCS Moves for Regular Military Moves
Tax-deductible PCS moves for military members include moving from your home to your first duty station; moving from one duty station to a new one; and moving from your final duty station to either your original home or a nearer point to your final duty station. If your final PCS is to a farther point than your original home, your deductible expenses may only include those that would have been associated with a move to your original home, with other expenses disallowed.
Other PCS Moves
Sometimes spouses and dependents move without a military member, such as when a military member dies or is imprisoned. In these cases, military dependents may deduct unreimbursed PCS expenses related to a move to the member's place of enlistment, the member's or the spouse's home of record, or a nearer point in the United States than the furthest of these places.
IRS Forms and Rules
You can determine your tax deduction using IRS Form 3903. The deduction is recorded on line 26 of Form 1040. Retain all your moving-expense receipts and your PCS forms from both duty stations in your permanent files in case of an audit. Never record separate moves at the same time by spouses as separate moves; instead, add the expenses together and record them as a single move. If you PCS more than once in a year, you should record these as two separate moves requiring two separate forms.