Moving Expenses and Tax Deductability
Are residential moving expenses tax-deductible?
Change in job location may qualify if 50 miles further from
home than previous job site
By Robert J. Bruss
Inman News
If you changed residences last year, whether you are a renter or a homeowner, Uncle Sam might be able to help out with your costs of moving by allowing you to deduct them on your tax returns. But you know he can be a rather stingy uncle so, unless you meet his tough requirements, your moving costs won't qualify to save any taxes.
Last year, more than 10 million home buyers, sellers and renters changed their residences. But most of these residence changers don't realize they can deduct their moving expenses. The tax savings can be hundreds, sometimes thousands, of tax dollars. Uncle Sam is so eager to help reimburse part of your moving expenses he doesn't even require you to itemize your other tax deductions. That's because residential moving costs are an "adjustment" subtraction from your gross taxable income, instead of an itemized tax deduction.
The first test for the moving expense deduction is your job location must have changed. If you are to qualify for the federal moving cost tax deduction, you must have changed job sites. You qualify if the distance from your new job location is at least 50 miles further from your old home than was your old job site. However, moving to a job site in a foreign country is not tax deductible unless you are in the military.
Example: Suppose the distance from your old home to your old job location was 10 miles. If the distance from your old home to your new job site is at least 60 miles in this example (10 plus 50), you qualify to deduct your residential moving expenses. The distance from your new home to your new job location doesn't matter. It's not important if you still have the same employer, changed employers, or became self-employed. All that counts is the 50-mile additional distance test from your old home to your new job location.
Work time is the second test. Presuming you passed the first test of job distance, the second moving cost deduction test requires you to work a specific number of weeks in the vicinity of your new job location. It's all right if you change jobs. If you are employed (although you need not work for the same employer), to qualify for the moving expense deduction you must work full-time in the vicinity of your new job site for at least 39 weeks during the year, after the residence move.
Part-time employment doesn't count. Neither does time spent looking for a new job qualify. But either spouse can meet this test. The purpose of this rule is to limit "frequent movers," such as those moving to sunny Florida in the winter and cool Michigan in the summer, from deducting their household moving costs.
Self-employed workers have a tougher test. They are required to work at least 78 weeks full-time in the vicinity of their new job location during the two years after their residence change. The purpose of this rule is to prevent students and hobbyists from deducting their moving expenses although they work a few hours each week. However, the work-time tests are waived for disability, job layoffs, or the taxpayer's death.
No dollar limit for direct moving expenses. If you met both the distance and time tests, there is no limit to your direct moving cost tax deductions. But pre-move expenses, such as house-hunting trips, don't qualify. Just deduct actual moving costs, as explained below.
If you drive from your old to new residence, you can either deduct 13 cents per mile, or your actual gas, oil, and repair (but not depreciation) expenses. Parking and tolls are also deductible as direct moving costs. In addition, don't forget about the deductible direct costs of shipping your pets, in-transit storage costs up to 30 days, insurance, and even costs for moving your "personal effects," such as your yacht, recreational vehicle or riding horses. Direct moving cost deductions also include costs of transporting your household furniture, clothing, family transport costs such as train or airline fares (but not meals en route), and lodging en route.
Don't deduct indirect moving costs. Although Uncle Sam is very generous, don't push him. If the moving expense is not a direct cost, it is not deductible. Expenses for your cook, maid, chauffeur or nurse are indirect, non-essential moving costs, which are not deductible. A loss on the sale of your home is a non-direct, non-deductible moving cost. Home sales and leasing commissions are also non-deductible indirect moving expenses.
Employer reimbursements may affect moving cost deductions. If you received reimbursement for your direct moving costs from your employer, you have neither moving cost deductions nor additional taxable income. If your direct moving costs exceeded the reimbursement, of course, the excess moving costs are tax deductible.
However, if your employer's reimbursement exceeded your direct moving expenses, such as for a non-deductible loss on the sale of your home, or for non-deductible house hunting trips, that excess payment is taxable income. When an employer provides a moving expense allowance, and direct moving costs did not exceed that amount, the excess allowance exceeding direct moving costs is taxable income. Military and overseas moves involve special moving expense deduction rules. For more details, please consult your personal tax advisor