Are Moving Expenses Deductible?
Can I write off moving expenses?
If you’ve moved recently because of a job then part or all of your
moving expenses may be deductible. It doesn't matter if it is a new job,
the same job or an old job - it just has to be job related. There are two
tests to determine if you qualify for the deduction.
(If you are a married couple filing jointly, only one of you will have
to pass the tests. You are limited to deducting the expenses that occur
within one year of the new job's start date.)
- The Distance Test. The first test is the 50-mile test. The
distance between your new primary job and your former home must be at
least 50 miles greater than your old commute.
- The Job Related Test. The second test must show that you moved
for work and not just for a change of location. You must be employed
full time in the general area of your new job location for at least 39
weeks during the 12 months after the move. This means that you can
switch jobs, but you must remain employed.
What if you own your own business? The rules are different if you
are self-employed. If you are a sole proprietor or partner in a business,
you can transfer yourself to Alaska if you feel the need and deduct the
cost, as long as you meet the 50-mile and 39-week tests. There is an
added test for self-employed people. The test requires that you work
full time in the area for 78 weeks during the two years after you move.
What if you are re-entering the workforce? If you are just
reentering the full-time workforce, you can claim the deduction if you
move for a job. Your new job and your former home must be 50 miles apart,
and you must pass the 39-week test.
What expenses can you deduct? You know that you have passed all
of the tests to deduct your moving expenses, now you want to know what
you get in return. You can deduct the following expenses:
- Packing and shipping costs
- Insurance on your belongings
- Up to 30 days of storage fees
- Some of the expenses occurred in traveling to your new home
- Cost of disconnecting and reconnecting utilities
Are there expenses that you cannot deduct? There are many expenses
associated with your move that are not deductible. You cannot deduct the
following: (However if any of the above items are used for business
purposes, you may be able to deduct some of the expenses as business expenses.)
- Expenses incurred from buying or selling a home or acquiring or breaking a lease
- Apartment security deposits
- Losses from selling or giving up club memberships
- Driver's license and car registration fees
- Expenses associated with house hunting
- You cannot deduct moving expenses paid or reimbursed by your employer.
Once you have rounded up all of your qualifying expenses, complete IRS
Form 3903. The resulting write off will be on your 1040.
Some considerations in company financed moves.
Your employer may pay for your moving costs in two ways. It can give
you a tax-free reimbursement for the amounts you can deduct or it can
add the reimbursement to your salary. If you receive a tax-free
reimbursement you don't have to do anything else. The expenses are
basically deducted from you income because the reimbursement isn't
included in your wages. The amount of the reimbursement will be
reported as a nontaxable item on your W-2.
If your employer reimburses you through your salary, then you need to
fill out Form 3903 to receive a deduction. You will have to do this if
you are self-employed. You are able to deduct only what the IRS allows,
no matter how much you are reimbursed. If your boss is very generous and
reimburses you for meals, you will have to pay income tax on that money.
You should be aware of one thing. If your boss gives you a check to move
before you actually start the moving process, you may have a little
extra thinking to do. What happens if you get the check in December and
move in January? It may seem odd, but you can deduct the move in the
year that you receive reimbursement, even if you move the next tax year.
In this case, you shouldn't file your taxes until you are completely
moved. If you haven't moved by April 15, file for an extension until you
are moved into your new home and can prove all of your qualifying moving expenses.
The above article is intended only for overview information.
Always check with current IRS regulations for exact requirements and criteria for deductions.
Back to Buyer's Guide
| 
