Moving your household and starting a new job can both be very stressful events. But, the IRS is there to take some of the sting out of the situation by giving you moving-related tax breaks. If you meet the requirements, you can deduct certain moving expenses on your Form 1040.
Requirements for the moving expense deduction
To deduct moving expenses on your tax return, the move must be work-related and satisfy the distance and time tests.
Distance test
To satisfy the distance test:
- The distance from your old residence to your new job location must be at least 50 miles more than the distance from your old residence to your old job location. For example, if your old commute was 15 miles, then the distance from yourold residence to your new job location must be 65 miles or more.
- However, your new commute can’t be greater than the distance from your old residence to the new workplace, unless you’re required to live there or your time or cost of commuting are being reduced despite the increased distance.
Time test
To satisfy the time test, you must either:
- Work full-time as an employee for 39 weeks during the 12-month period after the move; or
- If you are self-employed, the standard is increased to 78 weeks during the first 24 months after the move, with at least 39 of those weeks in the first 12 months.
- If you are sometimes an employee and sometimes self-employed, and you don’t meet the 39-week test for employees, you can still qualify if your combined employee and self-employment meet the 78-week test.
If you’re married filing joint, the deduction can be taken if either spouse meets the time test. However, weeks of the spouses can’t be combined for this purpose. Time off for vacation or illness count as employment time.
What expenses can you deduct?
Not all the expenses associated with moving are deductible. If you meet the requirements above, you can deduct the following types of expenses:
- The cost of moving your household goods and personal effects. This includes the cost of packing and transporting your goods, and for storing them for up to 30 days after the move. Costs for shipping your car and pets are also deductible.
- The cost of one trip for you and members of your household is deductible. Not everyone needs to travel together at the same time. You can deduct the cost of lodging and transportation, but not meals. If you drive your car, you can deduct either a standard mileage rate (23 cents in 2012, 24 cents in 2013) or actual gas and oil expenses, and you can deduct parking fees and tolls either way.
- Lodging expenses for the day you arrive in the new area. Temporary housing costs longer than that are not deductible.
- Note that costs for house-hunting trips to the new area are not deductible.
- There’s no limit on the total amount that can be deducted, but the expenses can’t be extravagant, and you must take the shortest and most direct conventional route. Expenses for a side trip on the way aren’t eligible.
- Costs must generally be incurred within a year from starting work at the new location to be deductible. In some circumstances expenses can be postponed, for instance to allow your child to finish school.
- The expenses are deductible in the tax year(s) in which they’re paid.
- You can take the deductions in the year paid even if you haven’t yet satisfied the time requirement, as long as you reasonably expect to satisfy it. If you later find that you don’t meet the requirement, you can include the previous deductions as income on your current return, or amend the previous return and remove the deductions.
Employer reimbursements
If your employer reimburses you for otherwise deductible expenses or pays them directly (e.g. your employer cuts a check to the moving company), you cannot deduct the expenses on your return. These payments or reimbursements won’t be included in your taxable wages, but they do appear for informational purposes in Box 12 of your W-2 with Code P.
Record keeping
Be sure to keep records and receipts which substantiate all your expenses. Also keep records showing the distances from old and new residences to the new job, employment periods after the move, and the dates of travel to the new residence.
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