What's Tax Deductible for Moving Expenses?
If you've recently moved due to job relocation, then some of your moving expenses may be tax deductible. This deduction applies both to relocation within the same company to a different office and to moving to another city for a different job, or even a different career.
The good news is that this is an "above the line" deduction and is not subject to all the rules of a n itemized the deduction. The bad news is that there are a few limitations on who can claim the deduction and what they can deduct. The complete rules and guidelines for moving expense tax deductions are spelled out in IRS Publication 521 & the deductions themselves are calculated on IRS Form 3903.
Are My Moving Expenses Tax Deductible?
The IRS applies two tests to see if you are eligible to deduct moving expenses.
The first test is the distance test. This requires that your new job location be at least 50 miles further from your home than your previous commute distance, calculated by using the shortest common route to each one. This means that a person with a 3 mile commute who moves 55 miles away to take a job in that town is eligible, while a person who had a 20 mile commute and then moves 65 miles away is ineligible, because the difference between the commute and the new distance is still less than 50 miles.
The second test is the time test. You must work at least 39 weeks full-time within the first 12 months after you arrive. Self-employed people have to meet this test and have to work at least 78 full weeks within the first 24 months of arrival. You are allowed to claim the deduction for moving expenses in the year of your move, even if 39 weeks has not passed, but you must file an amended return correcting the error with the next year's taxes if you are not able to fulfill the requirement within the year.
You can also not be reimbursed by your employer and claim the moving expense deduction. You can list both on Form 3903 and still claim some expenses if your moving expenses exceed the amount you were reimbursed, but you must report the reimbursement and the amount reimbursed for any non-eligible expenses as income.
Which Expenses Are Tax Deductible?
You can deduct what the IRS calls the "reasonable expenses" of moving your belongings to your new home and the cost of traveling to your new home. You cannot deduct the cost of your new home, food expenses, and sightseeing or additional trips.
Deductible Expenses Include:
- Transportation costs — You can claim the cost of traveling by car, including gas, oil, and tolls or parking fees, using either the standard deduction of 23 cents a mile (in 2012) or the actual costs. You can claim plane or train tickets for yourself and your dependents (and spouse if filing jointly) for a long move.
- Lodging Expenses — You can claim the cost of hotels and other accommodations while traveling from your old home to your new home and in the local area within one day after your furniture has been removed from your home. This does not exclude side trips and sight-seeing excursions.
- Moving Expenses — You can deduct the cost of movers, moving and packing materials, and/or van or trailer rental to transport your belongings. This includes the expense of having your vehicles and/or pets shipped to your new home.
- Storage Costs — You can also deduct the cost of "reasonable" storage fees for your belongings and transportation to have them stored for 30 days after your move.
Which Moving Expenses Are Not Tax Deductible?
Things that are not deductible include food and meals while traveling, trips or stops other than what is required to move, and costs related to the rental or purchase of your new home.
The following expenses are not tax deductible:
- Food — Meals, drinks, and other food purchased while traveling is not deductible, including food from room service or hotel restaurants. Detours and sight-seeing. Any side trips or diversions from the most direct route between the new homes is not deductible for either lodging or travel expenses. Admission to tourist attractions and other venues while traveling is not deductible.
- Additional trips — Trips to interview for jobs, house-hunt, or to travel back and forth to your old location are not tax deductible.
- Home-buying costs — The purchase price, security and/or pet deposit, or rent of a new home is not deductible. Neither are home improvements, closing costs, mortgage "points", loss on the sale of the old residence, mortgage penalties, or lease expenses.
- Vehicle & other fees — Fees for car tags, driver's licenses, pet licenses, etc. are not deductible.