Claiming Moving Expenses As A Tax Deduction
Do you have to move home to start a new job?
If so, then you may be able to claim some of the costs of moving as a tax deduction. There are certain criteria to meet, but whether this is a new job, your first job or the same job, if you have to relocate then there may be tax benefits.
Our guide looks at how these deductions work.
Moving tax deductions
There are various criteria that you have to satisfy to be able to claim moving expenses as tax deductions. These include:
- The move must be work related
- You have to pass the ‘distance test’
- You have to be in your new job for a certain period of time
The distance test
If you want to claim moving expenses, you have to prove that the location of your new job is at least 50 miles farther from your previous home than your last job was. For example, if you lived 20 miles from your old job, the new job must be at least 70 miles from your old residence before you can deduct the costs of moving.
According to the IRS, you have to use the shortest distance between the locations (so you can’t use a scenic drive). You should also bear in mind that the distance test only considers the location of your old home and how far it is from your previous job versus the job for which you relocated, not your new residence.
The time test
As well as the ‘distance test’, to claim moving expenses you also have to commit to working in the new location.
You can normally deduct your moving expenses if they are incurred within a year of starting your new job. And, you have to work full time at a new job for at least 39 weeks in the first 12 months.
If you are self employed you have to work full time at your business for any 78 weeks during the first two years. These do not have to be consecutive weeks.
If you’re married, only one spouse has to pass the time and distance tests.
Claiming your moving expenses
Once you meet the time and distance requirements, you can then start to claim your moving expenses as a tax deduction. IRS approved deductions include:
- The costs of moving
- Utility connection/disconnection charges
- Limited storage fees
- Shipping costs for your car
- Some lodging and travel expenses near your new and former homes
- Arrangements for your pets to travel to your new home
Remember that you can only claim moving expenses as a deduction if your new employer hasn’t reimbursed the costs already.
You use Form 1040 to claim the moving costs, but you don’t have to itemize any other deductions. The costs are detailed on Form 3903 and the total is transferred to the adjustments to income section of your return.
I am self employed and moved to start a new business. However, I was in hospital for 15 weeks and so I am worried I won’t satisfy the ‘time’ test. What do I do?
Carl – thanks for your question. The IRS understand such cases and so there are exceptions to the time test in cases such as death, disability and involuntary separation. They may also treat this is a special case.