Americans have always been mobile. Our restlessness is even encouraged somewhat by the Internal Revenue Service's tax deduction for moving expenses.
To write off your relocation costs, a move must be work-related. Then you have to pass the time and distance tests. But as long as a move meets these requirements, it doesn't matter if it's your first job, the same job or a new job.
And while you have to use the long Form 1040 to claim the moving costs, you don't have to itemize any other deductions. The costs are detailed on Form 3903 and the total transferred to the adjustments to income section of your return. There is no Schedule A to complete, no percentage-of-income thresholds to meet and no tax-deduction phaseouts because you made too much money.
Moving tax-break obstacles
The biggest moving hurdle, practically and taxwise, is the 50-mile distance test. As suburbia and exurbia expand, this test is designed to ensure your move isn't just a way to ease your daily commute to work.
The location of your new job must be at least 50 miles farther from your previous residence than your last office was. That means if you lived 10 miles from your old job, your new job must be at least 60 miles from your old home before you can deduct moving costs.
The IRS says to figure the distance using the shortest of the more commonly traveled routes; i.e., don't take the scenic route to make sure you meet the mileage measurement. Also, remember the distance test only considers the location of your old home and how far it is from your previous job versus the one for which you relocated, not your new residence.
Then there's the time requirement. It has two components and is Uncle Sam's way of guaranteeing you don't use tax breaks just to help you check out the scenery around the country. First, moving expenses generally are deductible if incurred within one year of starting a new job. Secondly, you have to work full time at a new job for at least 39 weeks during the first 12 months. The worked weeks don't have to be consecutive or even with the same employer.
Self-employed workers moving to a new locale must meet the year-to-move deadline and work full time at their entrepreneurial enterprise for 78 weeks during the first 24 months. Again, the worked weeks don't have to be consecutive.
Accounting for your movements
Once you meet the time and distance requirements, gather your moving receipts.
IRS-approved deductions include the costs to move household goods and personal property, limited storage and insurance fees, and utility connection or disconnection charges.
Some lodging and travel expenses near your new and former homes also are deductible, as are shipping costs for your car.
Uncle Sam even lets you write off the travel arrangements you make to get your household pets to your new home.
In addition to the basic eligibility and receipt requirements, here are a few other things to keep in mind.
A few other move considerations
- If you're married and file jointly, only one spouse needs to meet the time and distance tests. However, you cannot combine the weeks your spouse worked with the weeks you worked to satisfy the time-employed component.
- If your new employer reimburses you for some or all of your transfer costs, don't look to the IRS for additional help. Moving expenses paid by your boss aren't deductible.
- If you deduct moving expenses and then don't pass the time tests, you must file an amended tax return or include the moving expenses in your income the next year.
Details on moving expenses and tax deductions can be found in IRS Publication 521, Moving Expenses.
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