Moving Can be a Tax Deduction If You Work for It
Yes, moving’s a pain in the … wallet. The final cost depends on how much stuff the mover has, how far he or she is moving, and how much help is desired from a moving company. But maybe there’s some relief most movers haven’t considered. In certain circumstances, the final cost isn’t really the final cost. Moving expenses – some of them anyway – can become a tax deduction.
It all boils down to whether the move is job-related. Gail Rosen, a CPA for more than 33 years, says the move must pass two basic tests:
Distance: The distance from your old residence to your new job must be at least 50 miles more than the distance from your old residence to your old job. “But the distance from your new residence to the new job can’t be greater than the distance from your old residence to the new job, unless you are either required to live in the new location or your time or cost of commuting are being reduced,” Rosen says.
Period of employment: You must work full-time for at least 39 weeks during the 12 months immediately following the move to the new job. Self-employed? Then, you must work full-time for at least 39 weeks during the first year and for at least 78 weeks during the first two years after your arrival in the new location. Either you or your spouse can meet the period-of-employment test, she notes, “But weeks worked by one can’t be added to weeks worked by the other.”
Perhaps you’ve noticed a flaw in that last item: How can movers meet the one- or two-year requirements in the same tax year they moved? The answer: They don’t have to. The IRS allows you to claim the deduction before you fulfill that requirement; however, if you fail to meet it, you have to include that deduction as “other income” on your next tax return.
What can movers deduct?
Any “reasonable” expense incurred to move to the new location can be a tax deduction. Sallie Mullins Thompson, a CPA in New York City, breaks it down. “You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home,” Thompson says. But, she notes, “You cannot deduct your travel meal costs.”
Also deductible is the cost of moving your stuff. “You can deduct the cost of packing, crating and shipping your things,” Thompson says. “You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.”
What’s not a tax deduction? Again, Thompson spells it out: “You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering or breaking a lease.”
And if your employer reimburses you for the move? Rosen answered that question. The good news is that the reimbursement doesn’t count as income – if you document your expenses to your employer and you could have deducted them had your paid them yourself. The bad news? You can no longer claim the expenses as a tax deduction.
How to capitalize on the tax deduction
You can compile your moving expenses on Form 3903 and deduct them as an adjustment to your income when you file using Form 1040. Rosen notes that there’s no dollar limit on the amount of the expenses.
But she also offers a warning: “You can only deduct reasonable costs. That means the expenses can’t be lavish or extravagant. And you 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. Side trips, for example, aren’t deductible.”
Ian Wright, founder of MoverDB.com, echoes that advice about being reasonable: “Be careful as the IRS has a rough idea how much moves should cost and may audit you if you claim an abnormally high amount.”
Special circumstances that might apply
There are some instances when tax breaks are available for certain movers who don’t fall into the norm.
The requirements aren’t as strict for members of the Armed Forces, according to Marcia Geltman, CPA and tax partner at Nisivoccia LLP in Mount Arlington, N.J. “They can deduct their moving expenses without having to meet the distance or times tests discussed above. There are also special rules for retirees moving back to the United States from working abroad.”
Wright says some international movers in general can get a break. “Finally, you should be aware that if you’re moving to the U.S. (or back to the U.S.), most of your household goods including furniture, clothing, books, etc. can be imported without paying duty so long as they are for your own personal use.”
All that said, moving still likely could cost more than most people hope. But doesn’t it feel better knowing that it could provide a much-needed tax break?