Relocating is not cheap. This is why we’re glad we have the government moving expenses deduction available for us. Nevertheless, you need to comply with a set of rules that are highly regulated and enforced by the U.S. government. Here’s how to make sure you can add your moving expenses to your tax return form:
Moving Expenses Deduction: Some Basics
Moving expenses can be deducted by the government for all U.S. citizens. However, you need to meet some strict criteria:
When Are Moving Expenses Tax Deductible?
Firstly, you need to move around the same time you start working at your new job or location. Generally, moving expenses that incurred within one year from the day your new work contract began.
Secondly, the distance between your new workplace and your old home needs to be at least 50 miles greater than the distance between your old home and old workplace. Although this might seem pointless or confusing, the reasoning behind it is understandable. If you were willing to commute for x miles before, you most likely are willing to commute for x + 50 miles for your new job, too.
To clear up any confusion, let’s say you were living 5 miles from your old workplace before moving. To qualify for a moving expenses deduction, your new workplace needs to be at least 55 miles away from your old home. Yes, you read that right: The distance criterion does not take into account the location of your new home.
Furthermore, if you are an employee, you need to work for 39 weeks in the first year after moving. If you are self-employed, you need to work at least 79 weeks in the first 24 months. If you are both an employee and self-employed, your primary workplace will dictate which test you need to pass.
Attention! The law clearly states that moving expenses can only be deducted if you start working at a new location. This means being promoted within the same company but not changing work addresses does not qualify you for a moving expenses tax deduction.
Exceptions from These Rules
The time and distance criteria are closely regulated and enforced. However, exceptions can be made for those who can prove certain circumstances prevented them from moving within a year. These can include allowing yourself, your spouse, or your child(ren) to finish up studies, taking care of a sick loved one, etc.
There are cases where the distance criterion poses a disadvantage to citizens who move. If you commuted for 150 miles every day between the old home and old job, you can only benefit from a moving expense deduction if your new workplace is 200 miles away from your old home. However:
If the distance between your new workplace and your new home is not at least 50 miles greater than the distance between your old home and old workplace, you can still qualify for a moving expenses deduction if:
- Living at your new home is a requirement for your employment at the new location.
- Commuting from the new home to the new job will be considerably cheaper and less time-consuming.
- You are a retiree, survivor, Armed Forces member, union member, etc.
Retirees who worked abroad and move back to the U.S. as a consequence of permanently retiring. You will only be able to do so if both your former residence and your former main job location were outside of the United States.
Armed Forces members who move as a consequence of a permanent station change are also exempted from some of the aforementioned rules. However, they will need to move within a year of their active duty coming to an end, if the Joint Travel Regulations do not specify another timespan.
Union hall systems members can have their moving expenses deducted only if their primary job is within said union hall.
So What Moving Expenses Are Tax Deductible?
The above mentioned expenses are tax deductible for those who meet the criteria we talked about a little earlier. However, you need to keep in mind these all depend on the circumstances of your move. If some of them are unjustified, they will not be deducted.
Tax deductible moving expenses:
- Expenses for moving household goods and personal belongings.
- Justified storage expenses for up to 30 consecutive days.
- Traveling expenses, including airplane tickets, gas, parking fees, or any other tolls (except tickets).
- Accommodation while moving and traveling to the new location, including the day(s) you spend at the old location after removing your belongings.
Nondeductible moving expenses include those that do not meet the aforementioned criteria. In addition, for your travel expenses to be deducted, you will need to take the shortest and cheapest route possible and avoid unnecessary expenses.
- Meals are never deductible.
- Accommodation costs do not qualify for a moving expenses deduction if the distance between the old and the new location or the timing does not justify such services.
- Any additional expenses that come with sightseeing on the way cannot be deducted, and neither can repair or maintenance services.
- Costs that come from purchasing the new house or selling the old one. These include renovations, mortgage fees, real estate agent’s fees, or closing costs.
- House hunting expenses like visits to the new location. In fact, any family member is limited to one trip per move.
- Moving expenses that were already covered by your employer. This only applies to situations where your employer reported them accordingly. If your employer reported these expenses as income, bonus, or anything else similar, you will be able to fully deduct your moving expenses. However, this is illegal.
How to Benefit from a Government Moving Expenses Deduction
To qualify for a moving expenses deduction, you will need to provide documentation for said expenses. This includes receipts, bills, or any other official proof. Any expense needs to be reported on the tax form for the year you were billed for it.
For more information on how to perform a moving expense deduction, please visit the official IRS article on this matter.