Tax Tip: Moving Expenses Can Make for a Great Deduction, but There are Hurdles
Did you move due to a change in your job or business location? If so, you may be able to deduct your moving expenses, except for meals. White Nelson Diehl Evans receives several inquires about deducting moving expenses each year, said partner Michael Ludin, and sometimes expenses are deductible and sometimes not. He said, “One thing we find from these inquiries is that there are many misconceptions about who can take this deduction and what kinds of expenses are deductible.”
Mike offered some basic rules for deducting moving expenses:
The move must closely relate to the start of work. Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement. Mike noted that the expenses that can be deducted are those for moving yourself, the members of your household, and your belongings to the new location.
Your move must meet the distance test. Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.
You must meet the time test. After the move, you must work full-time at your new job for at least 39 weeks in the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at your new job site. You do not have to wait until the 39 or 78 weeks are completed in the new job to take the deduction on your tax return, Mike said. If you believe that this condition will be met, you may take the deduction in the year the expenses were incurred.
Here are some allowable and non-allowable expenses if you are eligible for the moving expenses deduction:
- Travel. You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home. You cannot deduct your travel meal costs. Most people will incur more expenses than those allowed as deductions, Mike noted. He continued, “Be sure to save receipts for the allowable expenses including your notes describing why they qualify as deductions under these rules.”
- Household goods and utilities. You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
- Nondeductible expenses. You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list. If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
There are many exceptions, conditions, qualifications, and limitations that can apply to the unique facts and circumstances of each move. Mike concluded, “Be sure to discuss your move and this possible deduction with your WNDE tax advisor, preferably before the move, since these rules could have a bearing on your decisions about the kinds and amounts of moving expenses you incur.”