Moving to a new home involves a lot of planning and work, and it can be costly as well. If you are moving because you got a new job, or your current job changed location, you may be able to deduct your reasonable moving expenses on your income tax return.
NOTE: The moving expenses tax deduction is an “above-the-line” deduction, which means it is taken before your AGI (adjusted gross income) is calculated, instead of after like most other deductions. Above-the-line tax deductions are subtracted from your gross income and the resulting number is your AGI. Therefore, above-the-line deductions apply whether you itemize or not. Above-the-line deductions, like the moving expenses tax deduction, are designed to help protect your personal exemptions and itemized deductions from phaseouts. Because of these characteristics, above-the-line deductions are often considered to be the most beneficial for taxpayers.
Who Can Deduct Moving Expenses — Tests for Eligibility
In order to be eligible to claim the moving expenses tax deduction, the IRS has 3 main requirements that you must meet:
• Your move is closely related to the start of work
• You meet the distance test
• You meet the time test
Move Related to the Start of Work
In general, you are allowed to deduct moving expenses that you incur within one (1) year from your first day of work. Your move must be closely related to both the location of your new job and the time you start the new job. According to the IRS, your move is considered to be closely related in place as long as “the distance from your new home to the new job location is not more than the distance from your former home to the new job location.” Your home refers to your principal residence, which can be a house, condominium, apartment, mobile home, or other similar dwelling.
The Distance Test
To qualify for the moving expenses tax deduction, your new job location must be at least 50 miles farther from your old home than your old job location. If you did not have a former workplace, your new job location must be at least 50 miles away from your old home. The IRS states that the distance should be determined by using the shortest of the most commonly traveled routes (so you won’t be able to use the scenic route just to meet the mileage requirement).
The Time Test
To be eligible for the moving expenses tax deduction, you must also work full-time for an employer in the vicinity of your new job location for at least 39 weeks during the year following your move. It’s important to note that these weeks do not have to be consecutive or with the same employer, so you are free to change jobs after you move. There are also exceptions for disability, death, involuntary separation, and other special situations. Additionally, if your employer transfers you or fires you after you move, the IRS will overlook the 39-week requirement.
Deductible Moving Expenses
With the moving expenses tax deduction, you are allowed to deduct the non-reimbursed cost of moving household goods and personal belongings to a new residence. This can include the cost of transportation, packing, unpacking, storage-in-transit, and valuation. Note that each qualified expense is limited to 30 days — for example, you can deduct the cost of renting a storage unit for up to 30 days (if you cannot move into your new home right after leaving your old residence).
Moving expenses that qualify for this tax deduction include the following:
• The cost of shipping automobiles and boats
• The cost of transporting household pets (including dogs, cats, tropical fish, etc.)
• The moving-related cost associated with connecting and disconnecting utilities
• The cost of moving personal belongings from a place other than your old residence (such as a summer home or relative's home), but not exceeding what it would have cost to move them from your old residence
• The cost of lodging (for you and other members of your household) while traveling to the new residence (but not the cost of meals)
Make sure you keep track of your moving receipts so you can take advantage of the moving expenses tax break.
NOTE: You cannot deduct any moving expenses that are paid for by your employer — that means any costs covered by reimbursements from your employer. Additionally, keep in mind there are special rules for the moving expenses tax deduction if you are self-employed, married filing jointly, or a member of the armed forces.
Claiming the Moving Expenses Tax Deduction
To claim this tax deduction, your moving expenses should be figured on IRS Tax Form 3903 (Moving Expenses) and deducted as an adjustment to your income on IRS Tax Form 1040 (U.S. Individual Income Tax Return). Attach Form 3903 to the 1040 Form that covers the year in which you moved. You do not have to complete or submit a Schedule A to claim the moving expenses tax deduction.
According to the IRS, you should not file Form 3903 if all of the following apply:
• You moved to a location outside of the United States in a previous year.
• You are claiming only storage fees while you were away from the United States.
• Any amount your employer paid for the storage fees is included as “wages” in Box 1 of your IRS Tax Form W-2.
For More Information
For more information about the moving expenses tax deduction — including deductible and nondeductible expenses, special rules, and moves to locations outside the United States — please see IRS Publication 521 (Moving Expenses).