Did you know your moving expenses may be tax deductible?
Moving can be expensive. However, in certain cases you can deduct some of the expenses incurred during a move on your federal tax return. Like all things tax related there are some relatively complex rules regarding who can take the moving deduction and when.
Which Expenses Are Deductible?
Not everything is deductible even if it relates to the move. Deductible expenses include the “reasonable costs” of moving your belongings from your old home to your new one. “Reasonable expenses” as defined by the IRS means transportation by the most common method using the shortest available route. Travel and lodging may also be deducted but meals may not be.
There is a standard mileage rate for people who travel using their person vehicles or you may elect to use the actual costs of travel by keeping records. Gas, parking fees, tolls, engine oil and similar costs are deductible but the depreciation of the vehicle’s value or required repairs or maintenance are not. Anything that is paid for by your employer may not be deducted either.
When Is A Move Deductible?
Moving expenses are only deductible when the move is “closely related” to the beginning of a new job or the relocation of your job. The IRS defines “closely related” as within one year in most cases. Exceptions include things like delaying the move to allow a child to finish school or other reasons that prevented the move from occurring earlier. Self-employed individuals may also deduct their move if they work in the new location and meet other requirements.
The Distance Test
In order for the expenses related to the move to be tax deductible the move itself must meet two tests, the first of which is the distance test. The distance test is met if your place of employment has moved a distance of at least 50 miles beyond that of your current job site. If you were working less than full-time before the move then your new place of employment must be at least 50 miles from your old home.
Exceptions to the distance test do exist. An exception is allowed if you are required to live in a new location by your employer. Another exception is made if you can show that you save considerable time or money in terms of your commute after your move. Members of the armed forces do not have to meet the distance test when they move.
The Time Test
Tax deductions for moving are available only to full-time employees who work at least 39 weeks in the year immediately following the move. Self-employed individuals are eligible if they meet this requirement and the additional requirement of working at least 78 weeks during the first 2 years. Individuals may file for the moving deduction in the same year if they reasonably expect to meet the time test even though they have not yet.
The time test does not apply to both spouses when a couple moves. However, one spouse must meet the test in full as the spouses are not allowed to combine their time worked for this purpose. People who work seasonally, such as teachers, may meet the time test by working full-time for a period of more than 6 months out of the year. Members of the armed forces receiving a new permanent assignment are also not required to meet the time test.
Two other exceptions to the rule include people who lose their new job for certain reasons and some people who made international moves or were the dependents or spouses of people who made international moves. People who lose their new job due to a transfer they did not request, layoff that was not the result of willful misconduct or disability may still take the tax deduction. Spouses of individuals who died before completing the time test at their new job may also take the tax deduction.
Other Things to Remember
When you are moving it is easy to let things slip through the cracks. One way to avoid this is to make a list and add to it every time you remember something else that needs to get done. For example, when you call the cable company to disconnect your service at your old home, make sure to put finding a new cable company on your to-do list for the move. This can be especially important if you or anyone in your household works online.