Did you know that if you are moving to a new place to start a new job or returning to the US to retire, you may qualify for tax deductible moving expenses?
Moving is expensive--like scrounging for the last penny under the floor mats at the drive-thru--expensive! It’s a relief that some of that cost is deductible from your taxes. Thankfully, the moving expenses deduction is an above-the-line deduction, which means it is taken before your AGI is calculated, meaning you can take it even if you do not itemize your taxes.
An average move across states costs around $5,360, according to the American Moving and Storage Association (AMSA). That figure is based on an average weight of 7,100 pounds and distance of 1,220 miles, but honestly, who’s average? That’s just the move itself, it does not include the utility deposits, plates, new memberships, school fees, or replacing the ketchup you had to leave behind. Moving can be offset by deductions, it pays (literally) to know them.
There are two primary factors that qualify you for a deduction if you move for a job, the distance test and the time test.
The Distance Test Explained
The job you are moving for must be at least 50 miles farther away from your residence than your former job was. Exceptions to the rule can be had if you can prove that you have required housing for the job (you know, like you’re moving to the Governor’s mansion) or that you can save money and time by moving to a different location that doesn’t meet the test. For example, moving near reliable public transportation may save you the cost of an extra household car and insurance. That could possibly qualify you.
The Time Test Explained
If you are moving to be an employee, you must work 39 weeks within the first year of moving. If you are moving and will be self-employed you must work 39 weeks within the first year and 78 weeks within the first two years of moving.
If it is time to do your taxes but you have not yet met your 39 weeks, you can apply for the deductions anyway as long as you expect to meet them within the required time test. If it doesn’t happen, you must reverse the deduction by claiming the original deduction as “other income” on your tax return or filing an amended return without the moving expense deduction. Unexpected things can happen in life and the IRS already thought it through, exceptions to the time test exist for disability, death, layoffs and relocation by your employer. IRS publications are thorough, easy to follow, and there are charts and examples for every possible scenario.
If you meet the time and distance test, you can deduct moving expenses that are incurred in the most direct and shortest time frame of travel.
- Travel by car at 23.5 cents per mile for 2014 or by the actual amount paid.
- Parking and toll fees.
- Travel (lodging, but not meals) to your new home. If family members travel separately, each members travel is still covered within a year.
- An additional hotel night upon arrival and one after furniture has been moved out.
- Connection and disconnection of utilities.
- The cost of shipping vehicles and pets.
- The cost of moving your household goods and personal effects from a place other than your former home up to the cost of moving them from your former home. For example: If your mom is like “Get that junk out of your summer home , I want to make it a Yoga studio!” You can and it will be covered up to the amount it would cost to get it out of your own basement.
- Storage and insurance for your stuff up to 30 days between the time it leaves your former and moves into your future home.
- The cost of moving goods to and from storage.
Makes moving easy, right?
If you are currently in the military, retiring or a dependent or widow of a retiree, moving expenses can be deducted as well, but there are more deductions and different rules outlined in IRS publication 521.
- Moving expenses cannot be deducted if your employer paid you for them separately from your regular pay.
- There’s no double-dipping. You cannot claim moving expense deductions and business expenses deductions on the same expenses. Business expense deductions are detailed in IRS publication 463. A little research or a good tax preparer can help you decide which will benefit you more.
When you unpack Fifi from her shipping crate, make sure to hold on to that receipt. Gas, toll, parking, storage, movers, utility and hotel receipts should be kept as well. When in doubt, save it. Receipts, cancelled checks, and bills can all be used as documentation to prove actual expenses.
Claim your moving expenses when you file your taxes for the year. Worksheet 3903 is dedicated to moving expenses. It’s short and sweet, 5 questions. It worth taking a few minutes to look over to see if you qualify. You can save quite a lot, and that change in your car seat can wait for another day.
If moving is in your near future, please share this post with your spouse, family members, or your new roomie(s)! Like us on Facebook or follow us on Twitter to get more tax tips in your newsfeed or timeline.