My wife and I have moved seven times in the last seven years, and each one cost anywhere between a few hundred and a couple thousand dollars. The good news is that a couple of those moves qualified for the moving expenses tax deduction.
The moving tax deduction is for people who move for a new job. If this describes your situation, here’s what you need to know about how you can qualify to get some of your moving expenses back.
What types of moving expenses are tax-deductible?
The Internal Revenue Service (IRS) has classified tax-deductible moving expenses as those that are reasonable to the circumstances of your move. Here’s a breakdown of what you can count.
Say you’re moving from New York City to Los Angeles. The IRS allows you to deduct transportation expenses if you take the most direct route. Traveling via Texas to visit a family member wouldn’t be considered reasonable.
In this case, you can only deduct what it would have cost to drive directly to your new destination.
If you travel by car, you can deduct your actual gas and oil expenses — if you keep an accurate record — or the standard mileage rate of 19 cents per mile. Regardless of which option you choose, you can add parking fees and tolls to your total deduction as well.
You cannot deduct expenses for general repairs, maintenance, insurance, or depreciation for your car.
Other travel expenses
In addition to deducting transportation expenses, you can also deduct the cost of your hotel stays along the way. You can’t, however, deduct the cost of your meals.
Also, you can’t deduct the cost of a hotel stay if it’s not along the most direct path to your new location.
Personal belongings and utilities
You can deduct the costs required to pack, crate, and transport your personal belongings. This includes the cost of shipping a car or pets to your new location.
You can also deduct the cost of storing your personal belongings. The only requirement is that it must be within 30 consecutive days of when you moved from your former home and before they arrive at your new home.
As for utilities, you can deduct the cost of connecting and disconnecting your utilities since the move requires these actions.
Qualify for the moving expenses tax deduction in 3 steps
Not just any move qualifies for the moving tax deduction. To find out if yours does, follow these three steps:
1. Pass the time test
You can deduct your eligible moving expenses on your tax return as long as you move within 12 months of starting your new job. The IRS doesn’t even require that you make arrangements for the move before you report to work.
You also have to work at your new job full-time for a minimum of 39 weeks in the first 12 months after the move to qualify for the deduction. If you’re self-employed, the requirement is 78 weeks.
For example, I moved from Arkansas to Texas in 2014 to start a new job, but my wife didn’t move with all of our stuff until a few months later. Since I worked full-time for more than 39 weeks at my new job, our move passed the time test.
2. Pass the distance test
Your new main job location must be at least 50 miles farther from your former home than your old main job location was.
For example, if your old job location was 20 miles from your former home, your new job location must be at least 70 miles from your former home.
There are a couple of exceptions to the distance test. For example:
- If you’re in the military and you moved because of a permanent change in station, the distance test doesn’t apply.
- If you’re a union member who works for several employers on a short-term basis, the main job location is the union hall.
3. Avoid double dipping
If your new employer is reimbursing you for some or all of your moving expenses, you can’t deduct those expenses because you didn’t pay for them. Make sure to keep track of who paid for what, so you don’t run into trouble.
Also, if you are self-employed, you can’t take a moving expenses tax deduction and a business expense deduction for the same expenses.
Other ways you can save money while moving
In addition to the taking advantage of the moving expenses tax deduction, here are some other tips to avoid overspending on your move.
- DIY moving. If you have enough help from family members or friends, avoid spending money to hire movers.
- Compare transportation options. Whether you choose to drive your personal belongings to your new location or hire someone else to do it, compare several options to make sure you’re getting the best deal.
- Get rid of some of your junk. Every time we move, it’s a chance to get rid of stuff we no longer use. If you have enough junk to offload, you might even be able to get a smaller moving truck.
- Get free moving boxes: You can buy moving boxes at places like Lowe’s or Home Depot for cheap, but those costs add up fast if you need a lot of them. Instead, search Craigslist and other local classifieds to see if anyone in the area is giving away used boxes for free.
Keep your receipts
Come tax time, it won’t be enough to estimate how much you spent on moving expenses. Keep your receipts and create a spreadsheet for all of your expenses, so you have them all in one place.
When you file your tax return, use Form 3903 to list your expenses and any reimbursements from your employer that you receive. Once you finish this, the IRS will include your moving expenses tax deduction in its calculations to determine how much you owe or are owed.
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