Moving? Your Expenses May be Tax Deductible

It is always tough taking a new job and relocating, but here are some deductions that could ease your pain. In order to take moving expenses deductions, you must first meet the following two requirements:

  • Distance Test: The distance test requires the distance between your new job and former house to be at least 50 miles greater than the distance between your old job and former house. Here is an easy distance test worksheet provided by the IRS:

1. Number of miles from your former house to your new workplace… 1.______________miles

2. Number of miles from your former house to your old job… 2.______________miles

3. Subtract line 2 from line 1. If zero or less enter -0-… 3.______________miles

Is line 3 at least 50 miles? If Yes, you meet the test. If No, you do not meet the test and cannot deduct your moving expenses.

  • Time Test: The time test requires that you work full time at least 39 weeks during the first 12 months after arrival at new job location. If self-employed, you must work at least 78 weeks during the first 24 months. You do not have to work for the same employer for all 39 weeks, and you do not have to work 39 weeks in a row in order to deduct your expenses on your current tax return. If you later fail to meet the time test, you must amend your return to remove the deduction or include previous deduction as other income on your next tax return.

Now that you’ve determined if you are eligible, let’s find out what is deductible

Deductible moving expenses include the cost of moving household goods and personal effects as well as travel expenses. Travel expenses include lodging (but not meals), parking tolls, and standard mileage (16.5 cents per mile during 2010) for one trip by the taxpayer and each household member. You may also include storage and insurance expenses as long as the items are stored no longer than 30 consecutive days after removed from your former home.

Keep in mind that many employers reimburse employees who change locations. If you are reimbursed by your employer, only the excess expenses can be deducted on your federal tax return. So if you are switching jobs in this tough economy, remember to keep track of your moving expenses. It may reduce your tax liability.