Taxes and moving might both be included on a list of . Both can lead to stress and irritation in having to fork up your hard earned money. There might be a glimmer of hope though if you find yourself relocation for a new job or new job location. While not always the case, the IRS will sometimes throw you a bone if your move is due to your employment. Let’s see if you’re eligible for a deduction and which expenses you can include on your tax return.
There are three basic requirements that need to be met in order to claim a deduction on your tax returns. The first rule is twofold, your move must be closely associated with your work both in time and place. The timing is relatively easy: generally a move within one year of your start date meets the time requirement. You may still meet the time requirement if your move was more than a year after your start date. For example, if you delayed your move in order to allow your child to complete high school, you are still eligible to deduct your moving expenses. If you can provide an extenuating circumstance that delayed your move more than a year, your move is still considered to meet the time standard. As for place, the location of your new job should not be further from your new home than your old home.
The distance test is the second requirement to claim a move as tax deductible. This rule is separate from the place association in the first requirement. The distance test states that in order for a move to be deductible, your new job location must be at least 50 miles farther from your old home than your former job location. This one is confusing. Fortunately there is a nifty little formula to help you determine whether you pass the distance test or not. Determine the number of miles from your old residence to your new workplace. Then determine the number of miles from your old residence to your old workplace. Subtract the first number from the second and if the answer is 50 or higher, you pass the distance test. It is important to remember that this test only takes your former residence into consideration.
The final requirement is the time test. The standards to pass this test differ based on whether you are an employee or self-employed. Let’s start with employees. The time test for employees is met when you work full time for at least 39 weeks for the first 12 months you are in the vicinity of your new job location. This standard is still met even if you do not work at the same job or for 39 consecutive weeks. For those you are self-employed, in addition to the 39 week qualification, have worked at least 78 weeks in the first 24 months of your arrival to the new job location. For the self-employed, you may count all full-time work done as an employee or self-employer, and you again do not have to be in the same work for all 78 weeks, provided you’re in the same general area.
Not everything is considered a deductible moving expense. Expenses incurred moving your household goods and personal effects as well as traveling costs are considered deductible. This covers costs acquired in-transit as well as storage expenses. Lodging and travel fees can also be deducted. The IRS is quite to point out though that these expenses must be reasonably incurred. For example if you decide to take an out of the way road trip, you cannot deduct the lodging fees. Fees from the shortest and most direct route are considered reasonable.
There is quite a long list of expenses that you will not be able to deduct. Your real estate process is not a deductible expense. That includes any part of your purchase cost, expenses from buying or selling a home, home improvements, house hunting expenses, and the like. Other exemptions are storage fees not associated with transit and food costs incurred while traveling to your new home.
For more information, see Publication 521 from the IRS.