Moving Expenses You Can Benefit From
Here in the US, one of the top reasons people move is because of a new job or job transfer. Uprooting your life for your career can be stressful, not to mention time-consuming and expensive. Thankfully, the IRS offers some relief when it comes to the cost of a job-related move.
What Qualifies as a Deductible Move?
In order for you to claim what the IRS considers qualified deductible moving expenses, your move must be closely related, in time and place, to the start date and location of your new job and meet the criteria of what the IRS calls “the distance test” and “the time test.”
Moving expenses you incur within one year from the date you first report to work at your new job are considered “closely related in time” by the IRS. If you do not move within a year of your start date, you may still be able to deduct moving expenses if you can show there were circumstances that prevented you from making the move earlier. Of course, many people move before the start date of their new job. “Closely related in time” addresses those who start a new job at a new location before they actually move.
“Closely related in place” means the distance from your new home to your new job is not greater than the distance from your old home to the new job. You may still be able to deduct moving expenses in you can show you are required to live in a new home farther from the new job than your old home as a condition of your employment or if you can show that you will spend less time or money commuting to your new job from the location of your new home.
In order to meet the distance test, your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. To put it into perspective, if your old job is in downtown Houston, your new job must be at least 50 miles outside of downtown to qualify.
To qualify for deductions, a job-related move must also meet the time test, which means you must work full-time for at least 39 weeks during the first 12 months immediately following your move. If you are self-employed, you will not only need to fulfill the time test requirement, but also work full-time for a total of 78 weeks during the first two years (e.g., 24 months or 104 weeks) immediately following your arrival to your new home. These weeks do not have to be consecutive.
For married couples, only one spouse needs to pass the distance or time test for a move to be deductible. One spouse can satisfy the distance requirement and the other spouse can satisfy the time requirement. Members of the armed forces who move because of military orders or a permanent change of station are exempt from the distance and time tests.
What Can You Deduct?
Your moving expenses are deducted from your adjusted gross income and can include things like the actual amount of gas or oil used by your vehicle for the move or the mileage rate of 24 cents per mile. There are smartphone apps available that can help you track your mileage. Parking fees and tolls incurred during the move are also deductible.
Other deductible moving expenses include the cost of packing and shipping or transporting your “household goods and personal effects” as well as members of your household to your new home. Save all of your receipts!
A few things that do not qualify as a moving expense include:
- Expenses related to buying or selling a home such as closing costs, mortgage fees, home improvements or new furnishings
- Loss on the sale of your old home
- Charges for signing or breaking a lease
- New car tags and licenses
- Security deposits
If you are planning or have recently made a job-related move and are hoping to deduct your moving-related expenses, consider hiring a tax accountant. A good accountant will point out all of the items you can deduct, items that you might miss otherwise, as well as flag any expenses that are not deductible. Investing a few hundred bucks in the services of a tax accountant will save you a headache of trying to get a grip on the latest tax codes (and prevent an audit!).
For more information about moving related expenses, visit the US Tax Center
And of course, for more information about moving and packing services in Houston, contact Max Movers Inc..