With tax season upon us, you may be looking for every little deduction and tax write-off possible. But when it comes to moving and relocation, Uncle Sam can get a little tricky. But, as long as you know what you can deduct, the pain of an expensive move can be alleviated a little. In fact, the IRS actually allows for quite generous deductions when it comes to moving expenses that are qualified under their criteria.
The main thing to remember is that your move must be related to your employment in order for any of the associated relocation costs to be tax deductible. The move must also cover a predetermined distance, 50 miles, from the home you’re moving away from. You must also stay at your new job for a specific period of time as well. Here’s how it all breaks down.
Time Requirements for Deducting Moving Costs
Remember, in order to be able to deduct moving costs, you’ve got to relocate for your job. So, you must begin work at your new place of employment no less than a year after you move. You must be employed full-time for a minimum of 39 weeks within those first 12 months after you move. If not, your moving expenses will not be eligible for deduction. However, there is a little loophole: you do not actually have to work for the same employer for that entire period nor does the time period have to be consecutive. For self-employed people that are relocating, the time period doubles.
Relocation Distance Requirements
Although time is a hard factor in determining if your moving expenses are eligible, distance may be even more so. In order to even think about deducting your moving costs, your new job must be at least 50 miles farther from your old home than your old job’s location was from your old home. So, if your old job was 10 miles away from your old house, your new job must be at least 60 miles away from your previous home. If the distance does not meet these criteria you will not be able to deduct your relocation costs.
Deducting Relocation Expenses
Once you determine that your move does qualify based on the IRS criteria, you’ll need to actually deduct the moving expenses when you prepare your taxes. So, what is the best way to do this? First of all, you will need to keep all receipts of the IRS-approved deductions including moving company, insurance fees, storage costs, utility disconnect and reconnect fees, auto transport expenses, and even some travel and lodging costs associated with the move and even house hunting trips. The IRS offers Publication 521 for a complete list of what you can deduct.
It is worth mentioning that only one person needs to meet both the distance and time criteria when you are married and filing jointly. However, couples cannot combine their time requirements for this purpose. If you are unsure about what you can and cannot deduct or if your move actually qualifies, please do consult with a tax preparation professional.
– Lance Grooms