What Moving Expenses Are Tax Deductible?
No one enjoys the process of moving, but we all have to do it at one time or another. Did you know that if you’re moving, or have already moved within one year of starting a new job, you may be able to claim moving expenses on your tax return. Even if you didn’t have a job lined up before moving, or you didn’t start a job right away after moving, you may be able to claim moving expenses. Take a look and see if you qualify for the sometimes overlooked tax deductible moving expenses and get your paperwork together now for faster and easier filing next year.
The Distance Test
Not everyone will qualify for this type of tax deduction, but the Internal Revenue Service has two basic rules. One is what it calls the “distance test,” which is a requirement that the new home is located at least 58 miles further than your prior work location was from your old home. If you did not have a workplace, or if you worked from home before the move, then the new job must be at least 50 miles from your old home. While this may sound a little confusing, IRS form 3903 has a simple worksheet that will help you figure this out.
The second IRS requirement is the “time test,” which states that you must have had 39 weeks of full-time employment in the 12 months following the move. This is where things can get a little complicated, as a move late in the year wouldn’t leave enough time to have passed to meet the requirement before the tax year is over, and the deduction can’t be taken the following year.
The Time Test
However, the IRS will allow you to take the deduction if you expect to work at least 39 weeks at full-time status following the move. If the year passes and you don’t meet the requirement, you can amend your tax return by filing Form 1040X, Amended U.S. Individual Income Tax Return. More simply, you could also report the amount deducted as income on the next year’s tax return as “other” income.
There are some exceptions to the time test requirement, in the case that:
- Your employer transfers you at their request.
- You are laid off from the job for any reasons other than willful misconduct.
- The job ends because you become disabled.
- You meet certain requirements for retirees or survivors living outside the United States (see the IRS website for details if you're living abroad).
- You are in the armed forces and a permanent change of station is behind the move.
- The form is being filed for someone who has passed away.
Qualified expenses include three key areas of moving-related costs, but do not include any for which your employer has reimbursed you.
Deductible expenses include:
1. Travel costs
Transportation and housing or lodging expenses for yourself and household members while moving from the old place to the new home can be eligible. The cost of meals during the travel is not part of the deal, however, but the rental of a vehicle may be included. Keep receipts for tolls, gas purchases, and hotel charges to apply to the deduction.
2. Packing materials and shipping personal items
Hold onto the receipts from any moving and storage companies you use, and even for any boxes you purchase, because the costs associated with packing, crating and transporting your personal property and household goods can be deducted. You may also be able to include the cost of storing and insuring these items while in transit, and even costs associated with transporting family pets can be deducted.
3. Utility fees
You can deduct the costs of connecting or disconnecting utilities if you’re charged any associated fees. Late fees and reimbursable deposits don’t count toward the deduction.
Other fees won’t be covered, such as any part of the purchase price of the new home, or any costs of related to buying or selling either home, or homeowner’s association fees. Renters can’t deduct any charges related to breaking or entering into a lease, nor can anyone deducted other money lost, such as unused gym membership dues or other subscription services.
Of course, none of this information is a good substitute for sitting down and talking to a qualified tax professional, and all of the information and links to the any of the forms you may need can be found at IRS.gov and in Publication 521, Moving Expenses.