5/1/18 Update: Due to changes in the new tax law, as of the 2018 tax year, moving expenses are no longer deductible. For additional information and some of the other changes brought by the new law, check out this article.
Did you know that you may be able to deduct certain moving expenses if the move is due to starting a new job or relocating an existing job?
Really? What Expenses Can I Deduct?
Per the IRS, “Reasonable Expenses”, which may include:
- Cost of lodging while traveling to new home
- Packing costs
- Shipping costs
- Storing and insuring household goods in transit
Is Everyone Eligible?
There are three tests that need to be met to deduct moving expenses:
- The Move Date/Location Must Coincide with New Job – generally, you can consider moving expenses within one year of the new job start date.
- The Distance Test – Your new job must be at least 50 miles father from your old home than your old job was. For example, if your old job was 5 miles from your old home, your new job must be at least 55 miles from that home. If you did not have an old job, the new job must be at least 50 miles from your old home.
- The Time Test – You have to work full-time at the new job for 39 weeks of the first year (self-employed individuals must work full-time at least 78 weeks during the first two years).
What if I don’t meet the Time Test by the time I file?
If you expect to meet the Time Test, you can claim the expenses on your return, and then amend that return if you don’t meet the Test.
Anything Else I Should Know?
- Main Home – only expenses related to your main home, not your seasonal or investment properties, are eligible for the deduction
- Reimbursed Expenses – if an employer reimburses any costs of the move, those payments will offset your deductions. If your reimbursements exceed your expenses, they may need to be included as income
- Nondeductible Expenses – there are certain items that aren’t deductible, such as: any part of the purchase price of new home, costs of selling your home, cost of entering or breaking a lease, meals in transit, car tags, and driver’s licenses costs
- Keep your receipts – it is important to keep accurate records of the expenses paid during the move (keep receipts, bills, mileage logs, statements of employer reimbursement, etc.)
- Special Rules – members of the Armed Forces and Retirees or Survivors living outside the United States may have different rules
- IRS Forms– the form you’ll need to fill out to deduct these expenses is Form 3903, Moving Expenses. Also, make sure to update the IRS with your new address by filing Form 8822, Change of Address
If you think you may qualify to deduct some or all of your moving expenses and need help, give us a call. We’ll make sure you have everything you need to take the most advantage of your situation.