Moving expenses can be deducted from your income tax return if you’ve had to relocate due to beginning a new job or had to be relocated for your current job.
If you do need to claim your moving expenses, they can be deducted on Line Line 26 of Form 1040. It is not necessary to itemize your deductions to deduct moving expenses. Attaching Form 3903 (Moving Expenses) to your 1040 is, however, necessary in order to claim these tax deductions.
Who Qualifies for Deductible Moving Expenses?
Qualifying for this tax deduction is not applicable for all types of moves, and to deduct your moving expenses, you need to fulfill three main conditions.
- Your move should coincide with when you have to relocate to your new work location. The move of house should be closely related (time-wise) to the start of your work. This basically means that you must incur your moving costs within a year of the day you begin your work at the new location.
- According to the criteria specified in the IRS distance test, your new place of work must be no less than 50 miles away from your old home than your previous job location. You will not qualify for a tax deduction if you are moving across town just to reduce your daily commute by a few minutes.
- It is required that you work full-time at your new location for no less than 39 weeks as per the IRS time test; however, the 39 weeks of work need not be successive and do not have to be for the same employer. IRS Publication 521 (Moving Expenses) contains information about a separate time test for people who are self-employed.
What Can you Deduct?
Moving costs that can be deducted are broken into two different divisions:
- The cost of moving belongings from your old home to your new home can be deducted. This covers the costs related to packing and shipping. Before your stuff is delivered to your new house after moving out of your old house, upto 30 days of storage expenses can be deducted for the period.
- Deduction of travel expenses to your new house are allowed. This covers transportation expenses for all of your household members that may involve airfare or car travel costs.
On Form 3903, the total of the first category on Line 1 and the total of the second category on Line 2 should be reported.
What Can’t you Deduct?
Costs that come from selling your house like renovations, closing costs, property taxes or mortgage fees cannot be deducted.
Expenses accrued from breaking your old lease agreement or entering into a new one cannot be deducted if you are or were renting a home.
Costs associated with adding finishing touches to your old or new home that includes any new furniture, appliances, or window dressings is not allowed to be deducted.
Costs of transferring car titles or getting a new driver’s license cannot be deducted if you are moving to a different state.
What if Expenses are Reimbursed by your Employer?
While transferring you to a new position or offering you a new job, your employer often offers to pay for moving costs, or at least to cover some. Being able to claim these costs as deductions depends on how you deal with this situation. Your employer can report these covered costs as income, or they might not.
You will have to decrease your tax deduction by the amount you were refunded in case your reimbursement is not declared as income by your employer on your W-2 and this figure should be reported on Line 4 of Form 3903.
Your tax deduction need not be decreased if your employer declares the reimbursement as income on your W-2.
Instructions on the process of deducting your relocation costs are given in IRS Publication 521 (Moving Expenses). Information is also provided for members of the U.S. Armed Forces and people moving abroad.
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