When it comes to taxes, Uncle Sam sometimes taketh a lot. But he giveth, too. Consider, for example, IRS Form 3903. It lets you reduce your tax bill if you have some qualifying moving expenses. Thus, it's probably worth a few minutes of your time to learn about it.
Do you and the expenses qualify?
Form 3903 can help you save a significant sum of money, but it's not necessarily applicable every time you move. Here's what it takes to qualify:
- Your move must be related to a new job, a job change, or a change in your work location.
- You must incur the moving expenses within a year of first reporting for work at the new location.
- Your new home must be as close to or closer to your new job location than your old home was.
- You must pass the "distance test," meaning that your new job location must be at least 50 miles farther from your old home than your old job location was. (In other words, if your previous commute was 12 miles, your commute to your new job location from your old home must be at least 62 miles. If you're only moving a few miles closer to the new job location, the IRS doesn't want to help pay for that.) If you have no previous workplace (perhaps because this is your first job), then the new job location must be at least 50 miles from your old home.
If you think this is a little complicated, you're right -- it is! But it's still not rocket science. So read on.
There's a "time test" to pass, too. The IRS explains it, saying, "If you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months immediately following your arrival in the general area of your new work location." The folks at TurboTax add, "If you have not met the time test by the time your tax return is due, you can still deduct your moving expenses if you expect to meet the time test within the required 12- or 24-month period."
More to know
Those in the Armed Forces whose move was required by a military order get a little reprieve: They don't have to pass the distance test or time test.
If your new employer reimburses you for your moving expenses, then don't bother with Form 3903. Uncle Sam doesn't want you double-dipping.
It's also worth noting that if you move first and then find a new job, you may still be able to use Form 3903 and get a moving-expense deduction if you still satisfy the rules above.
You can find even more details on Form 3903 (a PDF file) in the documentation that accompanies it. IRS Publication 521 (also a PDF file) offers even more information. It's worth learning more if you think you might be able to use this tax break, because there are some exceptions and details to know about, such as some relating to death, disability, military service, expatriates, and so on.
Which expenses qualify?
Here are the kinds of expenses that qualify: the cost of packing and moving your belongings (including in-transit storage and storage costs related to a foreign move), tolls, and lodging expenses. The cost of gas and/or oil used for the trip also qualifies, though you might also just use the mileage reimbursement rate that was recently $0.235 cents per mile. Remember to keep receipts.
Expenses that don't qualify include meals, side trips for sightseeing, travel expenses related to trips for job-hunting and interviewing, expenses related to buying or selling your home, and the like.
Next time you move for a new job, don't forget to look into whether you might be able to defray some of the cost of the move with a tax break.