Planning to move sometime soon? Or did you already move in the last fiscal year? If so, you may be eligible for a few tax deductions on your moving expenses. Here is everything you need to know about tax deductible moving expenses.
Conditions for Tax Deduction
In order to qualify for a tax deduction on your moving expenses, you must be moving for work related reasons. You should either be moving to a new job or you should have been transferred to a new work location. At the very least you should have started working full time soon after moving.
But remember, if your employer reimburses you for the move, you will not be able to claim the deduction. However, if you spend more than your employer reimbursed you, you can have the excess amount deducted from you tax.
To deduct your moving expenses, you need to pass two tests:
The distance test
The distance between your new job location and your old home must be at least 50 mile more, than the distance between you old job location and your old home. For instance, if your old job was five miles from your old home, your new job needs to be at least 55 miles from your old home (not your new one). If you were self employed or worked from home, your new job must be at least 50 miles from your old home.
The time test
You must have worked fulltime for at least 39 weeks in your first year at your new workplace to qualify for a tax deduction. If you haven’t met the required number of working weeks while filing your tax return, but you expect to meet, you can still file for the tax deduction. And if you did not file for deduction, the very year you moved out, you can still file for an amended tax return later, when you fulfill the time requirement, for the year you moved out.
If you are self employed, you must have worked full time for 39 weeks in the first year of moving and 78 weeks within the second year of moving.
In certain cases you don’t need to pass the time test to claim you tax deduction. These cases include:
- If you lose your job because of a disability.
- If you move for your employer’s benefit.
- If you’re laid off for any reason other than willful misconduct.
- If the person is dead and you’re filing on their behalf
You might not have to fulfill all of the above mentioned conditions if you are in the armed force, retiree or a survivor:
If you are a member of the armed forces, and you need to move due to a permanent change in station, you will be excused from having to both the time and distance test to claim your deduction.
If you are citizen of the United States who lived and worked permanently outside of the US, you can deduct the cost of moving from your taxes if you retire to a new home in the United States. You will not have to pass the time and distance test in these conditions.
If you are the spouse or dependent of someone working permanently outside of America at the time of their death, you can deduct the cost of moving to a new home in America from your taxes. But to claim the deduction, you need to move within 6 months of their death and you must have been living with the deceased outside of America.
What Expenses is Tax Deductible?
Not all your expenses while moving are tax deductible. Here is a list of all the expenses that are tax deductible and the ones that are not deductible.
Tax Deductible expenses
- Cost of packing and moving your belongings to your new home. This includes any fees from professional movers.
- Cost of moving any belongings from a secondary residence (summer home, relatives’ house) to your new home. However, the amount shouldn’t exceed the cost of moving the same belonging from your primary home to your new home.
- Cost of traveling (via the most direct route) to your new home for you and your family. You can either travel together or separately but you can claim only one trip per person.
- If you drive to your new home, you can claim deduction on fuel (actual cost of gas or 23.5 cent per mile), parking fees and tolls along the way.
- Cost of lodging while traveling to your new home.
- Cost of disconnecting and reconnecting your utilities for both your old and new home.
- Cost of storing and insuring your possessions while moving for up to 30 days.
- Expense for selling or buying of your home including house hunting, mortgage, home improvement and new furnishing.
- Charges for signing or breaking a lease
- Loss of any security deposit due to the move.
- Cost of food while travelling to your new home
- Cost of any side trip you might take while travelling to your new home.
Take some time to see if you’re eligible for these tax deductions and save yourself some $$$ on taxes this tax season.