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Moving Expenses

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By Roy Lewis

Thinking about a job switch... cross-country? Or just to another part of the state? Yikes. Big changes in your life. But, there might be some tax advantages in terms of being able to deduct your moving expenses, depending on your specific circumstances. Since we're a very mobile society, we'll briefly review some moving-expense issues. Fasten your seat belt... here we go.

You can deduct the expenses for one trip (for you and your family) to the new home and for moving your furniture and household goods (see below), if you satisfy the minimum distance and period-of-employment requirements below. If you meet these two tests you will be able to deduct your moving expenses whether you itemize your deductions or not. That is, you can take an "above-the-line" deduction and still receive benefits from your moving expenses, even if you don't itemize your deductions.

But, there are two tests that you must pass before you can deduct your moving expenses:

Distance test: The distance from your old residence to your new job location must be at least 50 miles more than the distance from your old residence to your old job location. (But, the distance from your new residence to the new job can't be greater than the distance from your old residence to the new job, unless you are either required to live in the new location or your time or cost of commuting are being reduced.)

Minimum period of employment test: As an employee, you must work full-time in the new general area for at least 39 weeks in the first 12 months after arrival there. (You would start counting after your last trip before starting work full-time). If you are self-employed, you must work full-time in the new general area for at least 39 weeks in the first 12 months and at least 78 weeks in the first 24 months after arrival there. Either you or your spouse can satisfy this requirement (but weeks worked by one can't be added to weeks worked by the other).

Leave or vacation time counts as employment time, and so do involuntary absences because of illness, strikes, shutouts, and natural disasters. Further, less-than-6-month, off-season periods of a seasonal-basis employment count if covered by your employment contract. (For the self-employed: if you perform services both before and after off-season.)

This minimum-period-of-employment requirement is waived if, after you get a job in which you could have reasonably satisfied this test, you are laid off or fired other than for willful misconduct or are transferred by the employer for the employer's benefit. The minimum period is also waived if you die or are disabled.

Deductible Moving Expenses: If you meet the above tests, you can deduct the following expenses for moving yourself and the members of your household (but not tenants or employees) to the new location:

  • The cost of moving household goods and personal effects. These costs include the cost of packing, crating, transporting, storing, and insuring (for any consecutive 30-day period after the move), connecting and disconnecting utilities, and shipping the car and household pets. Expenses to move household goods or personal effects from a place other than the old residence are deductible only to the extent of what it would cost you to move them from the old residence. The cost of moving items purchased en-route isn't deductible.

  • Expenses of travel (including lodging, but not meals) from the old residence to the new. The cost of a single trip for you and members of your household is allowed, but you needn't travel together at the same time. If you use your car for travel, you can deduct either the cost of gas and oil (accurate records must be kept) or a standard mileage rate (currently 10 cents per mile) plus parking fees and tolls. General maintenance, repairs, insurance, or depreciation aren't deductible.

  • Lodging expenses for the day you arrive in the new area, plus the cost of lodging in the old area within one day from the time you can't live in the old home because the furniture has been moved. Note that pre-move and temporary-living house-hunting expenses aren't deductible.

There's no dollar limit on the amount of the expenses, but you can only deduct reasonable costs. That means the expenses can't be lavish or extravagant. Also, you must move by the shortest, most-direct route available by the conventional mode of transportation used and in the shortest time commonly required to travel that distance. Side trips, for example, aren't deductible. So, don't plan to move from Ohio to Oregon via Hawaii!

The expenses must generally be incurred within one year from when you start working at the new location, but expenses may be postponed for a reason such as allowing your child to finish school.

The expenses will be deducted in the year(s) in which you pay them. Even if you haven't satisfied the minimum employment period by return time, you may deduct them. If you later can't satisfy the requirement, you must either include in income the amount you deducted, or file an amended return for the year of the deduction with the deduction eliminated. You also can wait and claim the deduction on an amended return or refund claim when you have satisfied the minimum employment period.

If your employer reimburses you for your expenses, or if your employer pays them directly, you won't have to include the reimbursements or payments in income if you properly account to your employer and if you could have deducted the expenses had you paid them yourself. (Of course, you get no deduction for any amounts you don't have to include in income.) Excludable expenses aren't included in "wages" or any other taxable amounts on your Form W-2, but excludable expense reimbursements your employer pays directly to you will appear for information purposes only in the 'Other' box (Box 13) of the W-2 as Code P.

To support your deduction, it's important that you keep records of distances from old and new residence to old and new job, dates of travel and arrival to the new area, employment periods, and records and receipts for your moving expenses. For additional detailed information, check out IRS Publication 521 and Form 3903 (and instructions).

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