If you move to get closer to your job, or you have to relocate, your unreimbursed moving expenses can be tax-deductible. The Moving Expense Deduction is what we tax professionals call an “Above-Line” deduction, which is more desirable than an Itemized Deduction (Schedule A). Why? Because above-line deductions– on page 1 of the Form 1040– reduce your Adjusted Gross Income, which then impacts other deductions, like the Medical Expense deduction and Miscellaneous Deductions. The IRS has some important information on this “Above-Line” deduction:
In order to deduct moving expenses, you must meet these three requirements:
1. Your move closely relates to the start of work. Generally, you can consider moving expenses within one year of the date you first report to work at a new job location. Additional rules apply to this requirement.
2. You meet the distance test. Your new main job location must be at least 50 miles farther from your former home than your previous main job location was. For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.
3. You meet the time test. After you move, you must work full time at your new job location for at least 39 weeks during the first year. Self-employed individuals must meet this test and also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test.
If you can claim this deduction, here are a few more tips from the IRS:
•Travel. You can deduct transportation and lodging expenses for yourself and household members while moving from your former home to your new home. You cannot deduct the cost of meals during the travel.
•Household goods. You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.
•Utilities. You can deduct the costs of connecting or disconnecting utilities.
•Nondeductible expenses. You cannot deduct as moving expenses any part of the purchase price of your new home, the costs of buying or selling a home, or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
•Reimbursed expenses. If your employer reimburses you for the costs of a move for which you took a deduction, you may have to include the reimbursement as income on your tax return.
•Update your address. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. File Form 8822, Change of Address, to notify the IRS.
•Tax form to file. To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses.