­­­Moving & Tax Deductions: Do You Qualify?

Moving can be rough – both physically and financially. The good news is that the IRS offers moving deductions to certain taxpayers.

By Einat Mazafi, guest contributor

Moving can really put a ding in your wallet. Surprisingly, though, one entity that could ease the burden of expense is good old Uncle Sam. The IRS allows for tax deductions if your move entails that you change jobs, job location, or even the address of the local coffee shop from which you conduct your daily business negotiations for your own company – so long as you meet a few requirements.

That’s right! You can’t just pack up your winter sweaters and snow globe collection, and move across the street. It has to be a legitimate move to a distance sufficient enough to create some legitimate expenses. It also has to be within a certain time frame; meaning, you can’t have moved 5 years ago and try to claim your deductions now. Additionally, you have to be employed full time, as defined by the IRS

One caveat to this golden little nugget of cash-back advantage is that if you are moving for your job and your employer is paying for your expenses, you likely won’t be able to claim deductions. However, if you’re on your own with the costs of travel, packing supplies, moving companies, utilities, cleanup, settling in, and so on, read on and reap the rewards!

The following are a few pointers on how to make the IRS rules work for you. They may not have done the heavy lifting, but they sure can put a little cash back in your wallet after you’ve paid the guys from the moving company that did.

The IRS has two main rules that apply to this beautiful little deduction: the “distance test” and the “time test”.

How Moving Deductions Work

The IRS Distance Test is pretty straightforward. Sometimes called the “50 mile rule”, the IRS distance test simply states that “your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home.”

Some get confused by that and think that it means they get a pass if their old home is simply 50 miles, or more, from their new home, or that the same applies with respect to their old job and the new. Neither of those scenarios works, however; it has to be a correlation between job and home, and new verses the old.

For example, if your former home was just 15 miles from your former job, your new job would need to be at least 65 miles from your old home.

The IRS Time Test is just as simple. You need to be employed “full time” or at least 39 weeks during the 12 months following your move, and in the same general area (keeping your distance, of course). That means you don’t necessarily need to work at the same job, you just need to hold down a full time gig in an area that meets the IRS distance regulations to qualify.

If you are self-employed, you can still qualify for the IRS deduction for moving. Same as the traditionally employed, your new workspace or home office must be at least 50 miles from your old home. The IRS does up the ante a little bit, though, on the time rule: self-employed taxpayers must put in 78 weeks (about 20 months) to qualify as “full time”.

Finally, those couples that are filing jointly only need to rely on one partner to meet the regulations to qualify for the deductions.

The IRS provides a good worksheet, form 3903, which helps movers get clear on whether they qualify for these special moving expense deductions.

The moving expense deduction is one of the only breaks you get before knowing for certain whether or not you qualify for the claim. Because of the time test regulations, most taxpayers can’t satisfy the requirements until the following year. Nonetheless, the IRS allows movers to claim the deduction the same year they move.

IRS Rules to Remember

  • You don’t qualify if you were laid off due to willful misconduct.
  • If your employer paid the full bill for your transfer, you can’t ask the IRS for those expense deductions.
  • If your company compensates you for any deductible expenses, you must reduce your moving deduction by the same amount. Also, remember that employer reimbursement for non-deductible expenses will probably be treated as wages on your W-2 Form.
  • Either partner can satisfy the time test on joint returns, but you cannot combine work periods to pass.
  • The time test does not apply if you’re a member of the Armed Forces and moved because of a permanent change of station.
  • You don’t qualify (nor can your partner benefit) if you become disabled, die, get laid off or fired before completing the time period regulation.
  • If you are a retiree who was working abroad, you do not have to meet the time test.
  • If you’re a surviving spouse or dependent of someone who died while working abroad, you do not have to meet the time test.

So, which expenses qualify? Here is a short, though certainly not complete, list:

  • Packing and transporting household goods.
  • Expenses related to moving personal items from somewhere other than your old residence (conditions apply).
  • Fees to disconnect and reconnect utilities.
  • Travel costs and one day of lodging for you and your household- you must use the most direct route.
  • Use of your car (either actual expenses or the per-mile rate of 24 cents plus tolls and parking fees).
  • Storing and insuring possessions for up to 30 days.

Take some time to figure out whether you qualify for moving expense deductions this tax season; you may be very pleasantly surprised by how much you save!

About the Author

Einat Mazafi is the owner ofNY Moving, a moving company based in New York. She is a specialist in providing high-quality relocation solutions to clients.

Image credit: The image included in this blog post is used with permission via the Creative Commons license through Flickr.

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