An individual taxpayer is allowed to deduct from their taxable income any moving expenses paid or incurred in connection with the commencement of work by the taxpayer as an employee or as a self-employed individual at a new principal place of business. Moving expenses are recorded on Form 3903 and entered on line for the Form 1040.
If you moved because your job or business moved to another location or because you started a new job that was in a new location, or because you started a new job or business, you may be able to deduct your some of your moving expenses from your taxes. You can deduct your moving expenses if you meet all three of the requirements:
- Your move closely relates to the start of work;
- You meet the distance test; and
- You meet the time test.
Which Moving Expenses are Deductible?
If you want to deduct moving expenses on your tax returns because it was work or job related, there are several deductions you can make in relation to the move. Deductible moving expenses are reasonable expenses that are incurred to:
- Travel: You can deduct any transportation and lodging expense that you made during the move from your old house to your new house. You cannot deduct any meal expense.
- Packing and Shipping: You can deduct any expense you made on packing and shipping expense made during your move.
- Temporary Living Expense: You can deduct expenses made if you checked in a hotel on the way.
- Utilities: You can deduct any fees paid for connecting or disconnecting utilities as a result of your move
There is no set dollar limitation on how much is deductible, but the amount must be reasonable.
What Does "Commencement Of Work" Mean?
Commencement of work may be:
- The beginning of work by the taxpayer for the very first time or after a long period of unemployment;
- The beginning of work for a new employer or the start of new business in a new location; or
- The beginning of work for the same employer or business but in a new geographical location.
How Can I Connect My Expenses with My Work?
Usually, the moving expenses must be connected to the commencement of work in time and location in order to be deductible. Typically, moving expenses incurred within 1 year of the commencement of work. If your employer does reimburse your expenses, you must claim the money as income on that year’s tax return.
In terms of location, the new home that the taxpayer decides to move into should be physically closer to the new place of work than the old home. An exception to this is if:
- There is a requirement as a condition for the taxpayer’s employer that he/she lives in the new home, even though it is further away than the taxpayer’s old home, and
- The taxpayer actually saves time in commuting to work even though the new home is further away than the old home.
Are There Any Additional Requirements?
For the move, you must relocate within one year of the time you first report to work at your new job location. You must also meet the minimum distance and the minimum employment tests in order to deduct moving expenses:
- Minimum Distance Test: The taxpayer’s new principal place of business must be at least 50 miles farther away from the taxpayer’s old home than the old place of work was.
- Minimum Employment Test: For an employee, he must work at least 39 weeks as a full-time employee in the 12 months following his arrival in the new place of work.
- The Other Time Test: For a self-employed individual, he must work a total of 78 weeks as a self-employed individual in the 24 months following his arrival in the new place of work, with at least 39 weeks being worked in the first 12 months.
Who is a Self-Employed Individual?
For the purposes of the moving expense deduction, a self-employed individual is one who performs services as:
- An owner of an entire interest in an unincorporated business; or
- A partner in a partnership carrying a business.
Do I Need a Tax Lawyer?
Determining what moving expenses can be deducted from your taxes can be complicated. Although there are various tax preparation software on the market that can help you with your tax problems, they cannot provide the same level of service that a tax lawyer can. If you are unsure about your taxes or you need someone to represent you before the IRS, a tax attorney can help you.