tax breaks — July 22, 2013

How to Enjoy That Summer Move

by Bob Williams

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tax deduction for moving expenses

Oh, yeah. We’ve moved in the summer. Heat. Sweat. Bugs. On the enjoyment scale it ranked right up there with being poked with a sharp stick. But the physical joys aside, relocating can often be a smart move.

There is a wealth of reasons to relocate: Maybe you need a bigger home; perhaps you want the kids to go to better schools; or it could be that it’s just time for a fresh start.

Moving for any other reason other than employment is not on the IRS radar screen. But if you are moving to start a new job, the IRS has a little extra incentive that can take some of the sweat out of a summertime move.

A Move Less Taxing

There are a few “tests” the IRS has in place to see if your move to a new job meets its criteria for deductions. It’s not “all-or-nothing,” however, so you may qualify for some deductions, but not others. So it’s wise to plan on going for the gold and apply for them all.

First, your new job has to be at least 50 miles farther from your former home than your previous main job was. For example, if your old employment location was three miles from your former home, your new job site must be at least 53 miles from your former home. As you can see, a move across town may not qualify.

Time figures into the IRS requirements as well. Whatever expenses you claim in your move have to be incurred within one year of the date you report to your new job. And once you do start work in your new location, you’re required to work full time for at least 39 weeks during the first year to qualify for a deduction.

If you’re self-employed, you’ll also have to meet that test – and you have to work full-time for a total of at least 78 weeks during the first 24 months you’re in your new location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test. There are some special rules and exceptions to these general rules, so see Publication 521, Moving Expenses for more information.

Other Deductions of Interest

You can deduct lodging expenses (but not meals) for yourself and household members while moving from your former home to your new home. You can also deduct transportation expenses, including airfare, vehicle mileage, parking fees and tolls you pay, but you can only deduct one trip per person.

You can also deduct the cost of packing and transporting your household goods and personal property, as well as the cost of shipping household pets. If you have to store items during the moving process, that may qualify for a deduction as well. You can also deduct the costs of connecting or disconnecting utilities.

What doesn’t qualify as a deductible expense? Any part of the purchase price of your new home, car tags, driver’s license renewal, the costs of buying or selling your home (or entering into or breaking a rental lease), or security deposits and storage charges (other than those incurred during your move).

Let’s Be Reasonable

There is a limit to what the IRS will allow for deductible moving expense. They say you can deduct what is “reasonable for the circumstances” of your move. To find out just what you can deduct, download Form 3903, Moving Expenses.

Remember, though, if your employer reimburses you for the costs of your move that you used to figure the deduction, the reimbursement may have to be included as income on your tax return.

Before you start your move, remember to keep all your records together, so you can easily access them when it’s time to put your deductions to work for you.

Then you can settle into your new job and home without worrying that you broke the bank getting there.

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