Under the right circumstances, you can deduct moving expenses on your annual tax return. Single taxpayers can deduct qualified job-related moving costs, but an unmarried partner accompanying them on the move is not entitled to the same tax relief. Married taxpayers can both claim the tax savings even if only one of them has a new job in their destination. Before you decide to gather your information and fill out Form 3903: Moving Expenses, make sure your move qualifies according to a few guidelines.
YOU’RE REALLY MOVING FOR WORK, AND IT’S FAR AWAY.
To qualify for a job-related deduction for moving expenses, you must actually have a job where you’re moving, not just hope to have one. Also, the new job location must be at least 50 farther from your former home that your old job location.
YOU PLAN TO KEEP THE JOB.
You shouldn’t be taking short term employment. You must work full time for at least 39 weeks during the first 12 months following the move. For the self-employed, you must work at least 78 weeks of the first 24 months after moving.
Keep in mind that paid and unpaid leave and vacation time count as employment time, as do involuntary absences due to illness, shutouts, strikes, and natural disasters. Seasonal employment of less than six months counts if covered by your employment contract or if you’re self-employed. Gail Rosen, CPA, PC of Martinsvills, NJ, says the time test is waived if you are laid off a job in which you could have reasonably satisfied the test, fired for reasons other than willful misconduct, or transferred for the employer’s benefit.
KEEP TRACK OF YOUR QUALIFIED EXPENSES.
Travel expenses for the move are deductible, including transportation and lodging for you and members of your household, including pets. This includes expenses for the day of arrival.
The cost to pack, ship, unpack, and store your belongings is deductible for up to 30 consecutive days after the move date and before the arrival date in the new location. Additional expenses can be claimed for a move overseas.
Deductible expenses have no dollar limit if they are considered reasonable expenses. If your employer reimbursed your moving expenses, you can only claim a moving expense deduction if the reimbursement is included in your wages.
Don’t try to deduct expenses for a vacation you enjoyed en route. Rosen tells us, “You also have to move by the shortest and most direct route available by the conventional mode of transportation used and in the shortest time commonly required to travel that distance.”
Remember that you may not deduct any of the following: meals, any amount of your new home’s purchase price, car tags, driver’s license, expenses incurred when buying or selling a home (mortgage fees, closing costs, or points), costs to enter or break a lease, home improvements to help sell your home, or the loss on the sale of your home.
Generally, the expenses must be incurred within a year of your new job’s start date but may be postponed in certain situations, such as delaying a move to allow a child to finish school. You can deduct expenses in the year you pay them, even if the minimum employment period hasn’t been met by filing time. Or you can wait and claim the deduction or an amended return after the satisfied employment period.
If for some reason your deducted and it turns out that you didn’t qualify, you will have to either include the deducted amount on the next year’s income or file an amended return for the year of the deduction.
The best plan is to save all receipts and/or canceled checks and talk to a tax professional to be sure you maximize your deduction without making mistakes that cause an IRS issue.