Tax Deductible Moving Expenses

Relocating because of a job has some tax benefits. That is, if your move satisfies certain requirements. The Internal Revenue Service (IRS) says that when you change residences because of employment you must meet three different guidelines. Before we talk about those, let’s define what the IRS means by a “job.”

If the company you currently work for transfers you to a new city, that qualifies you to deduct certain moving expenses. Relocating because you’re beginning a new job or even starting your own business also satisfies the IRS regulations. Of course, that’s the simple version of what makes you eligible for tax deductions. Here are the more complicated details.

A Trio of IRS Guidelines
You still have to satisfy three more restrictions:

  1. Your move must closely correlate to the date when you start work in the new location
  2. You must move a certain distance
  3. You must work a certain amount of time during the first 12 months after you move

Let’s delve a little deeper into each of these conditions. You can only deduct what you spent for moving within one year of the date you started work at the new location. Even then, you don’t get to deduct everything, but we’ll go into that later.

You can’t move next door or even down the street and claim those expenses. You must satisfy the distance requirement. Your new job must be at least 50 miles farther from your previous home than your last workplace was. For example, if your previous commute was 10 miles, then your new job must be at least 60 miles from your last residence. The IRS asks that you compute the distance using the shortest route; no fair taking the scenic drive.

Here’s an example of how the IRS wants you to calculate the distance. The number of miles from your old home to your new workplace is 100. The number of miles from your old home to your old workplace is 20. Subtract 20 from 100 and that give you 80 miles which clearly satisfies the 50-mile distance test.

As far as the time constraint, you must work full-time for a minimum of 39 weeks during the year after your move. If for some reason you don’t work the 39 weeks and you’ve already filed Form 3903, then you need to file an amended tax return or reintroduce the moving expenses you previously deducted as income on your next year’s return.

All of the above applies to a single person filing or a married couple who file separate tax returns.

If you relocate because your employer transferred you or you’re starting a new job, it’s fairly easy to determine if you qualify for a tax deduction or not. But these days many people work for themselves or their move falls into a different category than described above.

A Few Exceptions
A sole proprietor who moves and wants to deduct the costs of that move must still meet the 50-mile test plus the 39-week test. Besides that he needs to work full time at the new location for at least 78 weeks during the two years after his move.

When a married couple who files jointly relocates, only one of them needs to meet the distance and time requirements.

Members of the Armed Services, on active duty, don’t have to meet either the distance or time requirements when their permanent station changes. Then they can deduct any unreimbursed moving expenses.

If any of the following has happened, you don’t need to meet the time requirement:

  • A disability ends your job
  • Your employer benefits from your transfer
  • You are laid off or discharged for a reason other than misconduct
  • You are filing on behalf of a decedent

Now that we have all the rules out of the way, what costs associated with the move make the cut?

Deductible Expenses
Keep all your receipts, bills, credit card statements and track your mileage so you don’t miss any deductions. Another benefit says you can claim these expenses before you know for sure you satisfy the time requirement.

  • Packing and shipping your belongings
  • Professional moving services
  • Packing supplies
  • Moving insurance
  • Rental trucks
  • 30 days of storage
  • Lodging for traveling to your new home (but only one time for one person)
  • Airline or train tickets if moving a long distance
  • Shipping your car
  • Car expenses like gas and oil or the standard mileage allowance
  • Parking fees and tolls
  • Fees for disconnecting utilities at the old home and hookups at the new house
  • Cost of transporting pets

The 18-page IRS Publication 521 also lists nondeductible expenses. Some of those are:

  • House hunting costs prior to your move
  • Security deposits forfeited
  • Losses on sale of your old home
  • Mortgage penalties
  • Return trips to old home
  • Meals during your move
  • Sightseeing trips along your route

Once you have figured out what you can claim, you need the right tax forms to do so. When you’re ready to file, calculate your moving expenses on Form 3903. The good news is the form is brief, with only five lines. It’s the instructions that might trip you up.

You should file in the same year you incurred the costs.

A Few More Rules

  • You can’t file for moving expenses on Form 1040EZ or 1040A
  • You must use Form 3903 and Form 1040 (line 5 on Form 3903 should be transferred to line 26 on Form 1040)
  • Don’t forget to file Form 8822, to change your address with the IRS
  • You can’t deduct an expense as both a moving cost and a business cost
  • If you move for pleasure, you are responsible for all your own relocation expenses.
  • Don’t deduct expenses your employer reimbursed

Free tax help is abundant during the months January through April. You might want to take advantage of some knowledgeable assistance if you moved during the previous year because of a job.

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