The IRS provides a lot of deductions for hard working Americans like us but a lot of people are unaware of them or maybe scared of an audit. I say bring it on, as long as you have the receipts and proof to back it all up, you should take advantage of every deduction available out there. The ‘moving expenses’ deduction is one of the more valuable ones since it’s above the line, meaning you don’t have to itemize to take advantage of it.
But you can’t just move across the city to take advantage of this deduction, the move must be work related. The IRS is actually pretty smart and they require you to pass two tests: the time and distance tests. But should you meet both requirements it won’t matter whether it’s your first job, same job or a new job, you’ll still get to take the deduction.
Time and Distance Tests
The first test is to prove that you didn’t just move because you like the weather in your new city more than your old one. You must be employed full time for at least 39 weeks of the immediate 12 months after your move. The weeks don’t need to be consecutive though so you could even take a break or switch employers if you wanted to. There’s also a provision that waives this portion of the test should you be laid off or transferred.
The second test is to show that you didn’t move just to be closer to the beach. The distance between your new primary job location and your former home must be at least 50 miles greater than your old commute. So if you currently live 5 miles from your work, your new job location has to be at least 55 miles away from your current home.
Benefits of the Deduction
Now that you’ve passed both tests, what exactly can you deduct? Make sure you save your receipts because you can deduct all of the following:
- The costs to move household goods and any personal property(packing and shipping)
- The cost of traveling to your new home(only once though!) including lodging but not meals
- Actual driving costs like gas and oil or the standard 24 cents/mile rate
- Travel arrangements for pets
There are a lot of things you can’t deduct but I know I’d be much more likely to hire one of the big moving companies to help me out if the cost was tax deductible. You can get free, no obligation quotes on MovingRelocation.com.
Normally, I just ask my friends to help me out but I always feel a little bit guilty. Once you’ve piled up all the receipts it’s a relatively straight forward to complete IRS form 3903 – Moving Expenses and get your deduction.
The last thing to keep in mind is if your new employer reimburses you for moving costs you’re not allowed to take the moving expense deduction. Unfortunately, there’s no double dipping with this tax deduction since moving taxes paid by your boss are not tax deductible.
Readers, have you ever taken advantage of this tax deduction? I’ve never had to move further than a few miles since I’ve been working but I definitely plan on taking advantage of this in the future.
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What if your new employer gives you a relocation bonus? They simply give you the money for signing on and it doesn’t specifically have to be applied to moving expenses. They even give you it if you’re not moving for the job.
Thanks
Great question William. Relocation bonuses are generally taxed as W2 income so you should be able to deduct your moving expenses just fine with form 3903. The ‘relocation’ part is what makes it confusing but really it’s just a sign on bonus. You can easily check this with your new HR department or look at your first paystub and make sure that it’s counted as income.
Wow I didn’t know that you could even take a deduction for moving. This is probably unlikely for me to ever happen but it’s always good to know in case I run into someone who is moving.
Definitely a good deduction to know about. Although it won’t save you a ton, it is above the line so anyone can take it regardless of whether you itemize or not.
We were just a few miles short of being able to do this when we moved late 2012. I thought we’d just squeeze under the wire. Moving is expensive so it would have been nice!
Ah that sucks, I’ll be moving soon and although I don’t have a job yet, we should meet the requirements when/if I get one.
Harry!
Thanks for this valuable information. I didn’t realize that work-related moving expenses were a tax deduction. I have a friend that is moving due to work so I will be sure to pass along this article.
With any tax deductions, my biggest challenge is tracking the receipts! I start off pretty good at the start of the year but don’t stay consistent enough as the year progresses.
Have a great day!
Lisa
No problem Lisa, thanks for stopping by and commenting. Yea I know what you mean about the receipts, I usually keep them in a folder at work until the end of the year when I scan them all into my e-mail where I have a tax folder structure to keep everything neat and in order. The IRS accepts copies/scans of receipts so it’s a lot easier than holding onto receipts for years and years 🙂