Timely Tax Update: Moving Expense DeductionSeptember 07, 2015
Have a big move coming up? Make sure you’re aware of the savings available to you with the moving expense deduction.
If you have moving plans scheduled for the next couple months, be sure you avail yourself of the opportunity to save on taxes associated with moving. The moving expense deduction (briefly mentioned in our previous blog, 5 Tax Breaks for Recent College Grads) is a helpful tax savings tool especially in the summer and fall months when moving is most popular. Take note of important qualifications associated with claiming this deduction.
More about the deduction
The moving expense deduction can only be used if you meet three requirements:
- You have to start work around the same time that you move. Typically you can deduct expenses within one year of the start of your new job.
- Your move has to meet the “distance test”. This test requires that your new primary job location is located a minimum of 50 miles farther from your previous home than your previous job location. If your old job was 6 miles from your old home, your new job must be at minimum 56 miles from your old home to qualify for the deduction.
- Your move has to meet the “time test”. The first year after you move, you are required to have worked full-time at your new job (even if you’re self-employed) for at least 39 weeks. Also, at the new job location, you have to work full time for at least 78 weeks for the first two years. You are still able to claim the deduction if you expect to be able to claim it and your tax return is due before you meet the time test.
You can deduct:
- Utilities and household goods- You are able to deduct the cost to connect utilities at your new home and disconnect them at the old residence. You can pack and ship your property and deduct those costs, too.
- Travel and lodging expenses- You are able to deduct any expenses associated with your travel and lodging in the period you were moving. You can deduct travel costs related to the move for yourself and other members of your household even if all members do not move at the same time. However, meals are not deductible.
Keep in mind that you cannot deduct:
- Cost of selling your home.
- Any portion of the purchase price of your new residence.
- Any costs associated with breaking or entering into a lease.
- Any amounts reimbursed by your employer unless the reimbursement has been added to your earnings.
Be sure to:
- Include payment for a deduction on your tax return as income, if your employer pays you for the cost of the move later on.
- Update your address with the IRS (Form 8822- Change of Address) and the U.S. Post Office right when you move.
For more information on the requirements, refer to IRS Publication 521.
Questions? Contact any member of our Tax Services Team.