Can I write off moving expenses?
If you've recently moved because of a job, then part or all of your moving expenses may be deductible. It doesn't matter if it is a new job, the same job or an old job - it just has to be job related. There are two tests to determine if you qualify for the deduction. (If you are a married couple filing jointly, only one of you will have to pass the tests. You are limited to deducting the expenses that occur within one year of the new job's start date.)
- The Distance Test.The first test is the 50-mile test. The distance between your new primary job and your former home must be at least 50 miles greater than your old commute.
- The Job Related Test.The second test must show that you moved for work and not just for a change of location. You must be employed full time in the general area of your new job location for at least 39 weeks during the 12 months after the move. This means that you can switch jobs, but you must remain employed.
What if you own your own business?
The rules are different if you are self-employed. If you are a sole proprietor or partner in a business, you can transfer yourself to Alaska if you feel the need and deduct the cost, as long as you meet the 50-mile and 39-week tests. There is an added test for self-employed people. The test requires that you work full time in the area for 78 weeks during the two years after you move.
What if you are re-entering the workforce?
If you are just re-entering the full-time workforce, you can claim the deduction if you move for a job. Your new job and your former home must be 50 miles apart, and you must pass the 39-week test.
What expenses can you deduct?
You know that you have passed all of the tests to deduct your moving expenses, now you want to know what you get in return. You can deduct the following expenses:
- Packing and shipping costs
- Insurance on your belongings
- Up to 30 days of storage fees
- Some of the expenses occurred in traveling to your new home
- Cost of disconnecting and reconnecting utilities
Are there expenses that you cannot deduct?
There are many expenses associated with your move that are not deductible. You cannot deduct the following: (However if any of the above items are used for business purposes, you may be able to deduct some of the expenses as business expenses.)
- Expenses incurred from buying or selling a home or acquiring or breaking a lease
- Apartment security deposits
- Losses from selling or giving up club memberships
- Driver's license and car registration fees
- Expenses associated with house hunting
- You cannot deduct moving expenses paid or reimbursed by your employer.
Once you have rounded up all of your qualifying expenses, complete IRS Form 3903. The resulting write off will be on your 1040.
Some considerations in company financed moves.
Your employer may pay for your moving costs in two ways. It can give you a tax-free reimbursement for the amounts you can deduct or it can add the reimbursement to your salary. If you receive a tax-free reimbursement you don't have to do anything else. The expenses are basically deducted from your income because the reimbursement isn't included in your wages. The amount of the reimbursement will be reported as a nontaxable item on your W-2.
If your employer reimburses you through your salary, then you need to fill out Form 3903 to receive a deduction. You will have to do this if you are self-employed. You are able to deduct only what the IRS allows, no matter how much you are reimbursed. If your boss is very generous and reimburses you for meals, you will have to pay income tax on that money.
You should be aware of one thing. If your boss gives you a check to move before you actually start the moving process, you may have a little extra thinking to do. What happens if you get the check in December and move in January? It may seem odd, but you can deduct the move in the year that you receive reimbursement, even if you move the next tax year.
In this case, you shouldn't file your taxes until you are completely moved. If you haven't moved by April 15, file for an extension until you are moved into your new home and can prove all of your qualifying moving expenses.