During my recent move, I did quite a bit of research on what qualifies as a tax deductible moving expense. You see, my new employer had agreed to reimburse my expenses, but only if they were IRS deductible. As a result, I wanted to make sure that all of my expenses were deductible. Here’s what I found:
Deductible Moving Expenses Must be Incurred Within One Year from the Start of a New Job
You can deduct moving expenses if your move was (1) because you started a new job or business or (2) because of a change in your job or business location. These expenses must be closely related to the start of work, and expenses incurred within one year from the start of such work are generally considered closely related.* You might still be able to deduct expenses not incurred within one year if you’re able to show that circumstances prevented you from moving within that time.
Your New Job Must be At Least 50 Miles Farther from Your Old Home than Your Old Job was from Your Old Home
This is the “distance test” for IRS deductible moving expenses. In the event that you didn’t have a previous job, then your new job must be at least 50 miles away from your old home.
You Must Work At Least 39 Weeks During the 12 Months Immediately Following Your Move
That’s if you’re an employee. If you’re self-employed, you must work at least 39 weeks during the first 12 months after your move and at least 78 weeks during the first 24 months after the move. By doing so, you’ll meet the so-called “time test” for IRS deductible moving expenses. Just remember that you don’t have to work for the same employer or be self-employed in the same trade for all 39 or 78 weeks.
The Cost of Moving Your Household Goods and Personal Effects are Deductible
This includes the cost of packing and transporting your household goods and personal effects and those of your family from your old home** to your new home. The cost of shipping your car and transporting your pets are deductible as well. You can even deduct the cost of connecting and disconnecting utilities required because you’re moving your appliances.
The Cost of Traveling to Your New Home is Deductible
If you’re flying, you can deduct airfare. If you’re traveling by car, you can either deduct your actual expenses or calculate your expenses at the standard mileage rate of 23 cents per mile. And if you and your family need lodging along the way, that’s deductible too. But you cannot deduct the cost of meals during your trip.
Storage Expenses are Deductible
You can deduct the cost of storing and insuring personal effects and household goods within any 30 day period after the day your things are moved from your old home and before they’re delivered to your new home.
Your Expenses Must be Reasonable
So you can’t turn your move into a mini-vacation unfortunately. While you can deduct travel expenses that incidentally take you over a tropical island where you might have to stop for a night, your trip has to the shortest and most direct route available by conventional transportation. This means that any additional costs associated with sightseeing or detours aren’t deductible.
Some Expenses are Just Not Deductible
These include the following:
- The purchase price of your new home
- Car tags
- Driver’s license
- Expenses of buying or selling a home
- Expenses of entering into or breaking a lease
- Home improvements to help sell your home
- Loss on the sale of your home
- Losses from disposing club memberships
- Mortgage penalties
- Pre-move househunting expenses
- Real estate taxes
- Refitting of carpet and draperies
- Return trips to your former residence
- Security deposits (including any given up because of the move)
- Storage charges other than those incurred in transit and for foreign moves
If you’re looking at an upcoming move, you can keep your receipts so that you can deduct your moving expenses once tax season rolls around. For more information on what’s deductible, check out Publication 521 from the IRS.
*Note that the IRS normally won’t consider your move closely related to the start of work if your new home is further from your new job than your old home was from your new job. Nonetheless, you can still deduct your expenses if you can show that (1) your new job requires you to live at the new home or (2) your new commute is cheaper from the new home to your new job.
**You could also deduct the cost of moving household goods from somewhere other than your old home. But your deduction is limited to the amount that it would have cost to move the same goods from your old home.