Taking Moving Expenses as Tax Deductions

With the economy as it is these days people might find themselves moving to find work.  It is possible for these expenses to be tax deductible.  Here is a guide as to how.

A Case of Two Tests

There are two tests that determine if your moving expenses are deductible- distance and time.

  1. The distance test – your new work must be at least 50 miles father from your old home than your old job was from your old home; OR if you have no previous workplace or have been out of work or working part-time for a substantial amount of time your new job must be at least 50 miles from your old home.
  2. The time test – Employees must work full-time for at least 39 weeks during the first 12 months immediately following your relocation.  You do not need to work for the same employer for all 39 weeks and the weeks do not need to be in a row.  Self-employed people must work full time at least 39 weeks during the first 12 months and a total of at least 78 weeks during the first 24 months immediate following your relocation.

You also need to make sure that your move is within 1 year from the date you first report to work for the new job.  So if you move to a new area hoping to find work, hope you find it before 1 year passes!

Are We There Yet?

Haven’t met the time test by the time you need to file your return?  You can still take the deduction for the tax year in which you moved if you think you will satisfy the time test during the following tax year.   If you don’t take the moving deduction for the tax year in which you moved and meet the time test during the following tax year, you can go back an amend your tax return to take the deduction.  You must take the deduction on the tax return of the same year in which you moved.

What if you take the deduction for the tax year in which you move but then don’t end up meeting the time test?  You have two options.  Either take the amount of the deduction as “other income” the following tax year or amend the tax return on which you claimed the deduction to remove it.

What Moving Expenses Can Be Deducted?

You can deduction the cost of moving your household goods and personal effects and travel including lodging.  Some expenses might include:

  • Costs of connecting or disconnecting utilities.
  • Cost of shipping your car and pets.
  • Costs to store and insure your stuff within any period of 30 consecutive days after the day your things are moved from your former home and before they reach your new home.

There are many items that CANNOT be deducted, including the costs of meals while moving.  You also CANNOT take a deduction for any expense that was reimbursed by your employer.

Forms

Moving expenses are deducted by filing Form 3903.  You can find a copy of the form here. The deductible expenses are reported on Form 1040 (line 26 on 2011) and a copy of Form 3903 is filed with your return.

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