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How to deduct moving expenses

February 20th, 2013 - 1:05 PM

Deducting Moving Expenses

According to the IRS, if you moved for a job in 2012, you may be able to deduct your moving expenses when you file your 2012 return. (I moved for a job last year, so this is exactly what I plan to do). Today I’ll give you some basic information about deducting moving expenses, but for detailed information, you can visit the IRS website and check out publication 521. Then, when you’re ready to file, figure your moving expenses on Form 3903. Keep in mind that this deduction only applies if you move for a job – whether a new job, a job relocation, or your first job (pay attention college grads).

Let’s take a look at the basics of how to deduct your moving expenses:  

First, there are three requirements that must be met in order to qualify to deduct your moving expenses: Your move must be closely related to the start of work; you must meet the distance test; and you must meet the time test.

Closely Related to The Start of Work
Moving expenses incurred within one year from the date you start your new job will typically be considered “closely related.”  Note that it’s not necessary to have a job secured before you move as long as you do go to work there. If you do not move within one year of the date you begin working at your new job, you normally cannot deduct the expenses (unless you can show circumstances that prevented a move within that time).

The 50 Mile Distance Test
In order to pass this test, your new job location has to be at least 50 miles farther from your former residence than your old main job location was. For example, the location of my previous job was only 3.1 miles from the home I used to live in. My new job is 82 miles away from that home. That means the location of my new job is 78.0 miles farther. I passed the test!

Note: If you have no previous workplace, your new job location must be at least 50 miles from your old home.

The Time Test
This test basically just makes sure that you’re actually moving for work.

  • If you are an employee, in order to pass this test you must work full-time for at least 39 weeks (9 months) during the first 12 months immediately following your arrival in the general area of your job location. For example, I started full-time in May 2012, so I’ll have to wait until February 2013 to pass this test. Even though I have not met the time test by the time my 2012 return is due, I can still deduct my moving expenses on my 2012 tax return because I expect to meet the 39-week test in 2013 – the same applies for meeting the 78-week test.
  • If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks (18 months) during the first 24 months after you arrive in the general area of your new job location (78-week test).

Note: There are exceptions to the time test in the case of death, disability, or involuntary separation. Talk to your tax advisor if you are unsure.

  • If you have more than one job, you must define your main job location depending on the total time you spend at each job, the amount of work you do at each job, and how much money you earn at each job. Ask your tax professional if you are unsure of which job qualifies as your main job.
  • If you are married and file a joint return, and you and your spouse work full-time, either of you can satisfy the full-time work test but you have to satisfy it individually (not combined).
  • If you are a member of the armed forces and you are moving due to PCS orders, you do not have to satisfy the distance or time test. Armed forces members who are PCSing may claim moving expenses as tax deductions regardless. If you are in the military, read more about deducting your PCS moving expenses here.

Now let’s talk about what moving expenses the IRS says you can and cannot deduct on your taxes.

You can deduct the following moving expenses:

  • The cost of packing, crating, and transporting your belongings.
  • If you move by car, you can deduct the parking fees and tolls you pay to move. You can also get $.23 per mile traveled.
  • The costs of connecting and disconnecting utilities.
  • The cost of shipping your car and your household pets to your new home.
  • The cost of moving your household goods and personal effects (movable personal property that you own and frequently use) from a place other than your former home.
  • You can include the cost of storing and insuring household goods and personal effects.
  • You can deduct the cost of transportation and lodging for yourself and members of your household while traveling to your new home. This also includes expenses for the day you arrive.
  • You can only deduct expenses for one trip per person. Members of your household do not have to travel together or at the same time.

You cannot deduct the following moving expenses:

  • You cannot deduct the cost of moving things like furniture you purchase on the way to your new home.
  • Car tags.
  • Driver’s license.
  • Any part of the purchase price of your new home.
  • Expenses of buying/selling your home (like closing costs).
  • Return trips to your old home.
  • Security deposits.

Note: You cannot deduct moving expenses that have been paid for by your employer.

After you’ve determined that you will be able to deduct moving expenses, this is the documentation you will need:  

An accurate record of your moving expenses will ensure the deduction process goes smoothly. Be sure to save items like receipts, cancelled checks, credit card statements, mileage logs, and bills. It’s also important that you save your 2012 W-2 statements from your employer. Click here to see an illustrated moving deduction example. If you moved with U-Pack in 2012, you can get a copy of your Bill of Lading and Delivery receipt here.

Have questions? Leave a comment below and I’ll try to find the answer to your moving expense questions. Or, get your tax question answered by the IRS at IRS.gov or by calling 1-800-829-1040.