Tax Tips
Deductible Moving Expenses - November 2003
Richard Scrivanich - Partner
If you have moved (or will be moving) because of your job, some or all of your moving expenses may be deductible.
You can deduct the expenses for one trip (for you and your family) to the new home and for moving your furniture and household goods (see below), if you satisfy the minimum distance and period-of-employment requirements below. If you meet these two tests you will be able to deduct your moving expenses whether or not you itemize your deductions.
Distance test:
The distance from your old residence to your new job location must be at least 50 miles more than the distance from your old residence to your old job location. (But, the distance from your new residence to the new job can’t be greater than the distance from your old residence to the new job, unless you are either required to live in the new location or your time or cost of commuting are being reduced.)
Minimum period of employment test:
As an employee, you must work full-time in the new general area for at least 39 weeks in the first 12 months after arrival there (you would start counting after your last trip before starting work full-time). [Alternative wording for time test where the client is self-employed: Since you are self-employed, you must work full-time in the new general area for at least 39 weeks in the first 12 months and at least 78 weeks in the first 24 months after arrival there.] Either you or your spouse can satisfy this requirement (but weeks worked by one can’t be added to weeks worked by the other).
Leave or vacation time counts as employment time, and so do involuntary absences because of illness, strikes, shutouts, and natural disasters. And less than 6-month off-season periods of a seasonal-basis employment count if covered by your employment contract [for a self-employed: if you perform services both before and after off-season].
This minimum-period-of-employment requirement is waived if after you get a job in which you could have reasonably satisfied this test you are laid off or fired other than for willful misconduct or are transferred by the employer for the employer’s benefit. The minimum period is also waived if you die or are disabled.
Deductible moving expenses:
If you meet the above tests you can deduct the following expenses of moving yourself and the members of your household (but not tenants or employees) to the new location:
- The cost of moving household goods and personal effects. These costs include the cost of packing, crating, transporting, storing and insuring (for any consecutive 30-day period after the move), connecting and disconnecting utilities and shipping the car and household pets. Expenses of moving household goods or personal effects from a place other than the old residence are deductible only to the extent of what it would cost you to move them from the old residence. The cost of moving items bought en-route isn’t deductible.
- Expenses of travel (including lodging but not meals) from the old residence to the new. The cost of a single trip for you and for members of your household is allowed, but you needn’t travel together at the same time. If you use your car for travel, you can deduct either the cost of gas and oil (accurate records must be kept) or a standard mileage rate plus parking fees and tolls. General maintenance, repairs, insurance or depreciation aren’t deductible.
- Lodging expenses for the day you arrive in the new area, and the cost of lodging in the old area within one day from the time you can’t live in the old home because the furniture has been moved. Note that pre-move and temporary living house-hunting expenses aren’t deductible.
There’s no dollar limit on the amount of the expenses, but you can only deduct reasonable costs. That means the expenses can’t be lavish or extravagant. And you have to move by the shortest and most direct route available by the conventional mode of transportation used and in the shortest time commonly required to travel that distance. Side trips, for example, aren’t deductible.
The expenses must generally be incurred within a year from when you start working at the new location, but expenses may be postponed for a reason such as allowing your child to finish school.
The expenses will be deducted in the year(s) in which you pay them. Even if you haven’t satisfied the minimum employment period by return time you may deduct them, and if you later can’t satisfy the requirement you must either include in income the amount you deducted, or file an amended return for the year of the deduction with the deduction eliminated. You also can wait and claim the deduction on an amended return or refund claim when you have satisfied the minimum employment period.
If you are reimbursed by your employer for your expenses or if your employer pays them directly, you won’t have to include the reimbursements or payments in income if you properly account to your employer and you could have deducted the expenses had you paid them yourself. (Of course, you get no deduction for any amounts you don’t have to include in income.) Excludable expenses aren’t included in “wages” or any other taxable amounts on your Form W-2, but excludable expense reimbursements your employer pays directly to you will appear for information purposes only in the Box 12 of the W-2 as Code P.
It’s important that you keep records of distances from old and new residence to old and new job, dates of travel and arrival to the new area, employment periods, and records and receipts for your moving expenses, to support your deduction.
If you have any questions concerning moving expenses, or any other tax matter, please give me a call at (562) 698-9891.
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