Tax-Deductible Moving Expenses
Tax Tips About Moving Expenses and Your Federal Tax Return
If you have to move because of your job — whether you’re starting a new job or working at the same job in a new location — you may be able to deduct some of your moving expenses on your income tax return.
Moving expenses are deductible on Line 26 on the front page of Tax Form 1040. That means you do not have to itemize your deductions in order to deduct your moving expenses. However, you will need to attach Form 3903 (Moving Expenses) to your 1040 to claim this tax deduction.
Who Can Deduct Moving Expenses?
Not all types of moves will qualify for this tax deduction. There are three main criteria that must be met before you can deduct your moving expenses:
1. Your move must coincide with a change in work location and be closely related to the start of work. In general, this means that your moving expenses must be incurred within one year of the date you begin work at a new location. The change in work location can be due to a transfer within your current company or a job at a new company.
2. Your move has to meet the IRS’ distance test, which states that “Your new job location must be at least 50 miles farther from your old home than your previous job location.” For instance, if your previous job location was 5 miles from your old home, your new job must be located at least 55 miles from your old home. Therefore, moving across town to shave a few minutes off your daily commute will not qualify for a tax deduction.
3. You need to meet the IRS’ time test, which states that “After the move, you must work full-time at your new job for at least 39 weeks the first year.” Note that these 39 weeks do not have to be consecutive, nor do they all have to be for the same employer. There is a separate time test for self-employed individuals that is described in IRS Publication 521 (Moving Expenses).
Which Moving Costs Are Tax-Deductible?
When it comes to moving expenses, there are two categories of items that you are allowed to deduct:
1. You can deduct the cost of transporting your belongings from your old home to your new home. This includes the costs associated with packing and shipping. You can also deduct up to 30 days of storage expenses for the period after you move out of your old house and before your things are delivered to your new house.
2. You are allowed to deduct travel expenses to your new home, which includes transportation costs for all members of your household. This may involve the cost of car travel or airfare to your new location. Keep in mind, however, deducting the cost of meals is explicitly prohibited.
You should report the total of the first category on Line 1 of Form 3903, and the total of the second category on Line 2 of Form 3903.
What Are You Not Allowed to Deduct?
You cannot deduct any expenses associated with selling your house — like home improvements, closing costs, property taxes, or mortgage fees.
If you are/were renting a home, you cannot deduct any costs that are incurred from breaking your old lease agreement or entering into a new one.
You are not allowed to deduct the costs of redecorating your old or new home, which includes any new furniture, appliances, or window dressings you may require.
If you are moving to a different state, you cannot deduct the cost of transferring car titles or getting a new driver's license.
What About Moving Expenses That Are Reimbursed by Your Employer?
Sometimes an employer will agree to help pay for moving expenses when transferring you to a new position or offering you a new job. How you handle this depends on whether the amount you are reimbursed is reported as income on your Form W-2 (Wage and Tax Statement).
If your employer does not report the reimbursement as income on your W-2, then you will have to reduce your tax deduction by the amount you were reimbursed. You will report this figure on Line 4 of Form 3903.
On the other hand, if your employer does report the reimbursement as income on your W-2, then you do not have to reduce your tax deduction.
Where to Get More Information
IRS Publication 521 (Moving Expenses) explains how to deduct your moving expenses. It also provides information for members of the U.S. Armed Forces and people who are moving outside of the country.