Whether you’re relocating across town or across the country, moving is expensive.
By the time you’ve paid to have your household goods packed and moved, canceled and reconnected utilities and racked up storage fees, you could easily find yourself out thousands of dollars.
Many people don’t realize that if they’re moving to start a new job, transferring with a current employer or even returning to the U.S. to retire after working abroad, their moving expenses may be tax deductible.
Plus, moving expenses are an “above-the-line” deduction, which means they reduce your adjusted gross income and can be claimed even if you don’t itemize deductions.
Two tests generally must be satisfied to claim a moving-expense deduction:
• Distance test. The distance between your new job and your former home must be at least 50 miles farther than your previous workplace is from that home. For example, if you used to work 10 miles from home, your new workplace must be at least 60 miles from your old home. If this is your first job or you were unemployed, the job must be at least 50 miles from your old home.
• Time Test. Regular employees must work full-time at least 39 weeks during the 12 months after moving, although the weeks needn’t be consecutive or for the same employer. (For self-employed people, it’s 78 weeks during the first 24 months.)
If you moved this year, you can claim the deduction on your 2013 taxes even if you haven’t yet met the time test, provided you expect to during the coming year.
If you later fail to meet the time test, you must reverse the deduction, either by including the amount as “other income” on your 2014 tax return, or by filing an amended 2013 return.
Qualified moving expenses include:
Costs for packing and transporting household goods, personal effects, pets and vehicles.
Fees to disconnect and/or connect utilities.
Travel costs for you and household members to the new home. (Meals cannot be charged).
Use of your car during the move.
Storing and insuring your possessions for up to 30 days.
Note: Family members needn’t move at the same time nor by the same means of transportation.
Expenses that do not qualify include:
Expenses of buying or selling a home, including closing costs, mortgage fees, house-hunting expenses, home improvements or new furnishings.
Loss on the sale of your old home.
Charges for signing or breaking a lease. Fees for new car tags or driver’s license in your new locale.
Expenses incurred on side trips en route to your new home (e.g., sightseeing).
Security deposits (including any given up due to the move).
Also, you cannot take a moving expense deduction and a business expense deduction for the same expenses.
See IRS Publication 521 for all eligible and ineligible expenses and other details about the moving expense deduction.
To file for the deduction, complete IRS Form 3903 and attach it to a Form 1040 Income Tax Return.
You don’t need to complete a Schedule A unless you are otherwise itemizing deductions. (You cannot claim moving expenses on a 1040EZ Form.)
Also note: If your employer reimburses you for any deductible expenses, you must reduce your moving deduction by that amount; and, employer reimbursement for non-deductible expenses will likely be treated as wages on your W-2 Form.
Take a few minutes to calculate whether you qualify for the moving expense deduction — you could save a bundle on your income taxes.
Jason Alderman directs Visa’s financial education programs. Follow him on Twitter: @PracticalMoney.