Whether you hire a mover or rent a truck and go the ‘do it yourself’ route, moving is a costly endeavor. But, in some cases, these costs can be offset through tax write-offs. If you are relocating to start a new job or because the location of your job or employer has changed, you may qualify for some significant tax deductions!
There are two factors that will determine whether you are eligible for a move-related tax deduction: distance and time.
The distance test states that the distance between your old home and new workplace must be at least 50 miles farther than the distance between your old home and your previous workplace (ie, if you previously commuted 10 miles to work and your new work location would require you to 60 miles, your move to a new home closer to the new work location could qualify you for a deduction. If you meet the time test!)
The time test is broken into two categories:
The first applies to employees of a company. It states that, in the first year upon arriving in the new location, you must work full-time for at least 39 weeks to qualify for a tax deduction on moving costs. The second applies to those who are self-employed. In this case, in addition to working full-time for at least 39 weeks in the first year you must also work full time for a total of 78 weeks in the first two years upon arrival.
There are exceptions to the time test which include death, disability, involuntary separation and other circumstances. Your tax preparer is best qualified to assist you in further investigating you tax options in these cases.
The amount of moving costs you are deducting must be considered “reasonable.” Reasonable expenses include the obvious: the cost of paying a moving company to transport household goods and personal belongings, but also some of the cost of traveling to the new home. This includes gas and lodging expenses, but not the cost of food or other optional activities (ie, sightseeing). So, while the kids might enjoy a detour to Disney during your trip to the new house, don’t expect the government to help you with that particular bill!
It is also important to keep in mind that you cannot deduct any moving expenses that are reimbursed by your employer, if the reimbursement is not considered part of your income.
While you may not be able to recoup all of your moving costs, these tips may help you get back a significant portion!