The process of buying and selling is certainly an expensive one, so anything you can do to save a buck or two would be a welcomed proposition. The good news is, you might be able to save a little of money by deducting some of your moving expenses if you’ve relocated because of a change in job. However, there are certain criteria that need to be met in order to qualify for such deductions come tax time.
Meet IRS Tests
In order to determine whether or not you’re eligible for deducting moving expenses, you’ll need to pass two IRS tests first: the distance test and the time test. As far as the distance test goes, your old house needs to be a minimum of 50 miles further away to your new job than the distance between that same house and your previous workplace. For instance, if your previous house was 15 miles away from work, your new workplace needs to be a minimum of 65 miles away from your old house.
In order to pass the time test, you will have to be classified as a full-timer for a minimum of 39 weeks during the first year after you move to your new home. If you work for yourself, you will also have to work at least 78 weeks during the first two years after moving into your new house. This amount of time can be combined between being self-employed and being on salary at another job.
It should be noted that there are exceptions to these rules. For instance, those in the Armed Forces don’t have to meet these requirements if the move involves a permanent change in station.
Itemize All Expenses Related to Transportation to Your New House
Some moves are so far that it might require a sleepover or two along the road before you actually get to your new house. Luckily, you can write off any expenses related to accommodations, fuel, tolls, and paid parking. The only thing that cannot be deducted are any meals that were bought along the way. If the move is so far that a flight or train ride is required, the cost of plane or train tickets can also be deducted.
While it’s ideal to keep a paper trail of such expenses, you can use the standard moving expense rate of 19 cents per mile if you don’t have any receipts.
What you should keep receipts for, however, are packing expenses, moving company invoices, mover’s insurance bills, costs to disconnect utilities at your old home and connect them at your new home, and storage costs for your belongings for up to 30 days following your move.
Factor in What Your New Employer Covered For Your Move
If your new company paid for your moving expenses, you’ll likely be limited in the types of deductions that you can make. After all, the move didn’t come out of your own pocket, so you probably won’t have much to deduct from your taxes, if anything at all. However, if your new employer only paid for some of the move, you should be able to write off any expenses that you covered. Just be sure to keep an accurate and timely log of who paid for what before you do your taxes.
Deducting Your Moving Expenses
There’s nothing for you to do if your new employer provides you with a tax-free reimbursement. In this case, the moving expenses have already been deducted because the reimbursement isn’t included in your pay. This amount will show up on the W-2 form that you’ll get from your employer.
On the other hand, if your employer added the moving reimbursement to your wages, you’ll need to complete IRS Form 3903 and attach it to your personal tax return to claim the deduction. You’ll see the results of your deductions on page one of IRS Form 1040. By the same token, you’re only allowed to deduct what the IRS allows if you’re self-employed, regardless of how much your employer pitches in.
The IRS will actually allow you to make tax deductions in the year that you move, even though it’s impossible to know if you pass the time test until the next tax year. If it’s determined that you don’t meet all the tests, you’ll need to reverse your deduction by either amending your original tax return or including the deduction made on your next tax return.
The Bottom Line
Taking advantage of tax write offs associated with moving because of a new job can help you get a little bit more money back when it comes time to pay Uncle Sam. However, there are certain criteria that needs to be met in order for you to be eligible for such tax deductions. Your best bet is to wait until your move is complete before filing your taxes so you can more accurately consider all permitted moving expenses, and be sure to have a seasoned accountant or bookkeeper help you figure it all out.