Moving is an experience most people dread. Not only is it stressful, its expenses often run in the thousands of dollars. One silver lining is that those moving expenses are often tax deductible. This article details the IRS guidelines on tax deductions for moving.
IMPORTANT NOTE: These are guidelines based on material published by the Internal Revenue Service, but always check with your tax professional.
Qualifying for the Deduction
There are two basic ways to qualify for moving related deductions:
• Passing two IRS requirements for moving deductibility because of your job: the distance test and the time test
• Qualifying under special circumstances
You will have to meet all the requirements under one of these two methods for any of your expenses to qualify.
The Distance Test
The IRS wants to determine that your new job is more than 50 miles further from your old house than your old job was from your old house.
Sound complicated?
It isn t once you get familiar with it. Let s break it down to make it easier. There are only four numbers involved.
First, calculate how far your old job was from your old house. Let s say that was 10 miles. We ll call this the old house, old job distance.
Next, calculate how far your new job is from your old house. We ll say that this distance is 75 miles. We ll call this the old house, new job distance.
Third, we need to subtract the old house, old job distance (10 miles) from the old house, new job distance (75 miles). That difference is 65 miles (75 10 = 65). We ll call this the old job vs. new job distance.
There s only one step left. If your old job vs. new job distance is greater than 50 miles, you pass the distance test! If it s less than 50 miles, I m afraid your move doesn t qualify.
The Time Test
Fortunately, the time test is a bit easier. If you spend 39 weeks out of the first 52 weeks at your new job as a full time employee, you pass. If you re self employed, you need to spend 78 weeks out of the first 2 years at your new job. Again, as long as you meet this standard, you pass the test.
Special Circumstances
While there are many special circumstances that can affect your eligibility, I ll just mention 3:
• Armed Forces. If you are in the Armed Forces and you moved because of a permanent change of station, you do not have to meet the distance test. See Members of the Armed Forces, later.
• Main job location. Your main job location is usually the place where you spend most of your working time. This could be your office, plant, store, shop, or other location. If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work.
• Union members. If you work for several employers on a short term basis and you get work under a union hall system (such as a construction or building trades worker), your main job location is the union hall.
Now let’s focus on what types of moving expenses are deductible.
Most of this information is taken directly from the IRS website: however, it is vital that you check with your tax professional on any information you find here.
For deductible expenses, the IRS writes the following:
Household goods and personal effects.
You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home. For purposes of moving expenses, the term “personal effects” includes, but is not limited to, movable personal property that the taxpayer owns and frequently uses. If you use your own car to move your things, see Travel by car, earlier.
You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects.
You can deduct the cost of shipping your car and your household pets to your new home.
You can deduct the cost of moving your household goods and personal effects from a place other than your former home. Your deduction is limited to the amount it would have cost to move them from your former home.
Storage expenses.
You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home.
Travel expenses.
You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. This includes expenses for the day you arrive.
You can include any lodging expenses you had in the area of your former home within one day after you could no longer live in your former home because your furniture had been moved.
The members of your household do not have to travel together or at the same time. However, you can only deduct expenses for one trip per person.
Here is the IRS take on nondeductible expenses:
Nondeductible Expenses
You cannot deduct the following items as moving expenses.
• Any part of the purchase price of your new home.
• Car tags.
• Driver s license.
• Expenses of buying or selling a home (including closing costs, mortgage fees, and points).
• Expenses of entering into or breaking a lease.
• Home improvements to help sell your home.
• Loss on the sale of your home.
• Losses from disposing of memberships in clubs.
• Mortgage penalties.
• Pre move househunting expenses.
• Real estate taxes.
• Refitting of carpet and draperies.
• Return trips to your former residence.
• Security deposits (including any given up due to the move).
• Storage charges except those incurred in transit and for foreign moves.
No double deduction. You cannot take a moving expense deduction and a business expense deduction for the same expenses. You must decide if your expenses are deductible as moving expenses or as business expenses. For example, expenses you have for travel, meals, and lodging while temporarily working at a place away from your regular place of work may be deductible as business expenses if you are considered away from home on business. Generally, your work at a single location is considered temporary if it is realistically expected to last (and does in fact last) for one year or less.
Whew! I realize it’s a lot of information, but hopefully it gives you what need to know when it comes to be tax time.
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