If you’ve recently found out you need to relocate for your job, you’re probably wondering this important question: Can I deduct moving expenses on my taxes? If you know you’re going to move for your job this year, be aware that you might qualify to write off certain expenses related to that relocation.
Can You Deduct Moving Expenses on Your Taxes? What You Need to Know
What Qualifies Me to Deduct Moving Expenses?
There are two especially important things to remember about moving and taxes. One, be aware you can deduct moving expenses. If you qualify for the deduction and don’t take it, that’s money you’ve unnecessarily left on the table. Two, you must know when and how to take that deduction because not every relocation (even if it is for a job) qualifies you to write off your move.
With that in mind, what requirements must you meet to legally take this tax deduction?
- Your move must relate closely (in terms of time and location) to the start of your work.
- You qualify according to the “distance test.”
- You qualify according to the “time test.”
The “distance test” means the distance from your old home to your new place of work must exceed the distance from your old home to your old place of work by fifty miles. If you have no previous place of work, the distance from your old home to your new place of work must be at least fifty miles. Any move closer than that means you cannot take this deduction.
The “time test” means you must be employed full-time for thirty-nine (or more) weeks in the first year. This year starts immediately once you arrive at the new location.
Also note there are slightly different rules for self-employed individuals. If you’re self-employed, you can still qualify. You just need to meet the same requirements as an employee for the first year, but you must also work for at least seventy-eight months of the first two years following the relocation.
How to Deduct Moving Expenses
All relevant moving expenses can be reported on Form 3903. The amount to deduct is then reported on your 1040.
What Can I Deduct on Form 3903?
When the IRS claims you can deduct “reasonable” moving expenses, that’s not 100 percent clear. To help clarify this gray area, the following are some examples of expenses that would fall under this umbrella. It is in no way a comprehensive list, but it offers an idea of what kinds of things the IRS deems “reasonable” for your long distance move.
- Costs associated with transport of household goods or personal effects. For example, the cost of your rental truck could qualify.
- Costs associated with storage of your items.
- Costs associated with required lodging during the relocation process.
What Can’t I Deduct on Form 3903?
Naturally, not everything can be included in your deduction. Meals, for example, are explicitly not deductible.
You must also consider whether your employer has paid anything to reimburse your moving expenses. Anything not included in your wages that an employer pays you expressly for moving costs must be subtracted from your total moving costs.
If you were still out of pocket, you can deduct the difference. If you paid nothing out of pocket, you cannot take this deduction.
Let’s look at an example to clarify that. Say you rented a moving truck and stayed one night in a hotel to get to your new home. You calculate you spent $1000 on total “reasonable” moving expenses. Your new employer paid you $500 to cover moving expenses.
(This was not part of your salary. This was specific money offered for moving purposes.)
You spent more on moving than you were given, and the difference is $500, which is your total moving deduction.
If your employer paid you $1000 and you spent $1000, the difference would be zero, and you would not qualify to deduct your expenses.
Please note, All Star Movers are movers—not tax experts. For more detailed information about anything related to your taxes, always consult a qualified accountant and/or tax preparer.
For moving-related questions, please feel free to reach out to a representative of All Star Movers, reputable Fairfax movers since 1977.
Topics: Moving Tips, Moving Costs, Long Distance Moving, Moving and Taxes
