Are moving expenses tax deductible? If you’re planning a local or long-distance move in the near future, you may be curious as to whether your moving expenses are tax deductible. Fortunately, many expenses incurred for job-related moves are permitted to be deducted on your tax returns. The IRS has certain parameters that must be met, and as usual, there are always exclusions and extenuating circumstances that may affect your specific situation.
Moving expenses that are tax deductible must meet 3 criteria:
1. Your move must be job-related
The purpose of your move should be to begin a new job, change jobs, or obey a request by your employer to relocate for your current job. This move needs to be accomplished within one year of the date you begin to work. There is an exclusion that lets you waive the one year date by showing extenuating circumstances. For instance, you may leave your household intact until your children finish school, then physically move everyone.
2. You must meet the distance requirement
Your new job should be located 50 miles farther than the distance between your home and your current job. Here’s an example to help clarify this: If you live 10 miles from your current job and your new job is 55 miles away, you don’t meet the criteria. You’ve only increased your job site distance by 45 miles. Your new job would need to be located at a distance of 60 miles from your home to meet the rule. For a first-time job seeker, this distance rule would be applied as 50 miles from your current residence.
3. You must meet the time requirement
You need to work full-time for 39 weeks during the 12-month period following your move. This time limit starts the day you arrive. Full-time refers to industry standards, so there’s no set amount of hours. You don’t have to work for the same employer, and the 39 weeks don’t have to be consecutive.
During your full-time working period, you don’t have to account for days off due to illnesses and vacations. If you work seasonally, you’re still considered full-time when not working if your employment contract specifically states this situation. A typical example is teachers who are paid throughout the year but have three months off during the summer.
Self-employed persons have additional time benchmarks. They must reach the first 39-week milestone, but in addition, they must continue to work for a total of 78 weeks over a 24-month period. You may count time worked both as an employee and a self-employed individual, but all the hours should be worked in the same general area.
I’ve met the criteria; now what can I claim?
Reasonable moving expenses for packing and transporting home furnishings and personal items are deductible, including the costs of rental trucks and storage units for up to 30 days. You may claim the amount required to ship any personal vehicles and, if necessary, pets. The fees associated with disconnecting your utilities at your old location and connecting your new location are allowed.
The physical move of you and your household will incur another round of expenses. Of these, airline tickets, baggage fees, and lodging are all deductible. Taking a vacation en route is not covered, and neither are any meals. If you drive your own car, the costs of oil and gas are deductible, or you may use a straight moving allowance amount per mile (in 2018, it’s 17 cents). All parking fees and tolls are permitted to be claimed.
So, how do I file these claims?
Filing a moving expense deduction on your tax form is fairly straightforward. IRS Form 3903 walks you through your deductions and then specifies where to place the total on your 1040 form. By the way, you must use Form 1040 to file these deductions — 1040EZ and 1040A won’t work. Please make sure to check all rules and regulations with the IRS as tax laws change every year.
TurboTax states that the moving expense deduction is one of the few deductions that’s allowed to be claimed in the year you move, even though you might not have met the requirements of the time test. If you don’t subsequently meet those expectations, you must reverse this deduction on next year’s tax return.
When relocating to a new state, be aware that each state’s tax laws differ. For example, if you were moving to San Diego, you would visit the California Tax Service Center for guidelines and instructions on filing the proper forms for your state tax return.
As with any governmental agency, the more records you retain, the better. Keep all receipts, bills, credit card statements, and canceled checks. Make sure you maintain a detailed mileage log and store a copy of your W2 with this paperwork. If your employer reimburses you for any part of the move, keep a complete record of those monies.
My employer has reimbursed some of my expenses. Now what?
If your employer pays for your moving expenses through an allowance or direct reimbursement, you may only claim the deductible expenses that exceed that amount. Ask your employer if you have an accountable or non-accountable reimbursement policy. Each is handled differently by the IRS, and it can get a little confusing. IRS Publication 521 will help you with this and other moving expense questions. If your employer pays for nondeductible expenses, such as a loss on the sale of property, then you must declare this as income on your federal tax return.
Moving expenses that are tax deductible will help defer some of the costs involved in relocating. These above-the-line deductions will reduce your adjusted gross income. With a little forethought and good record keeping, you can take advantage of all that Uncle Sam has to offer and make that change of scenery even more attractive.