Are Moving Expenses Tax Deductible?
Provided the move is necessary for a new job, individuals and households who are relocating
, whether domestically or abroad, may be able to deduct moving expenses when filing taxes. The IRS requires that specific conditions be met for moving expenses to be deductible. When conditions are satisfied, certain expenses may be deducted from the adjusted gross income of a tax filer. It is important to understand not only what the conditions are but also which expenses qualify so next year's taxes are done properly.
Although businesses may always deduct moving expenses, the rules are different for individuals and households. Two conditions which must be met in order to legally deduct moving expenses:
* "The distance test" states that the location of the new job has to be a minimum of 50 miles farther from the former residence than the previous job was. This rule pertains to local moves and limits moving expense deductions for people who change jobs within the same city or town.
* "The time test" stipulates that the person filing must be employed at full-time status for 39 weeks of the first year immediately following a move. Self-employed individuals must meet this condition for a total of 78 weeks in the first two years after a move.
Assuming these conditions are met, certain moving expenses may be deducted, including:
* Moving company costs
* Lodging
* Meals
* Gasoline and oil
* Parking fees and tolls
Only expenses accrued en route to the new residence are deductible. If, for instance, local movers are hired in the new location to help with unpacking or storage, that expense is not deductible. For gas, parking and toll expenses, detailed records must be kept. An alternative to deducting the cost of fuel is to take 24 cents per mile driven.
Expenses that are not deductible, even while en route, include:
* Car repair
* Insurance
* Maintenance
* Vehicle depreciation
Additionally, any expenses associated with buying or selling a home, fixing up a home to sell, vehicle registration, storage fees or other routine purchases are not eligible for deduction. Only expenses accumulated in transit qualify.
Reimbursed expenses may not be deducted, although they do not count as taxable income. Unreimbursed expenses qualify for deduction from one's adjusted gross income, not as an itemized deduction. IRS Form 3903 is used to calculate moving expense deductions. Exceptions to the time test include death, disability and involuntary separation. Members of the armed forces who are permanently re-stationed are excluded from satisfying the distance test.
Moving is an exciting time, especially when you are relocating to begin a new career. Taking the time to research your options regarding tax refunds can make the move more comfortable and your wallet a little plusher.
by: Stephen Daniels
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