The IRS allows you to deduct a generous variety of moving expenses when you’re relocating to start a new job or business. Your state may also have similar relocation deductions in its income tax code. You should always consult a qualified accountant or tax attorney to make certain your deductions are allowable, but the following guide will give you an idea of how moving-expense deductions are handled by the IRS.
Timing Is Everything
You can only deduct personal and business moving expenses that you incurred within one year from the start of your job or business venture in the new location. So, if you start a new job in another area but don’t move your household to the new location until 15 months later, you can’t deduct your moving expenses.
There are some exceptions to this rule, however. If you can show that you were delayed for a credible reason—family illness, children completing school, or a similar situation—the IRS may permit you to deduct costs associated with moves made after the one-year period.
Working Full Time Gets You Deductions
You don’t need to be employed at the new location before you move there. You will need to begin full-time work shortly after arriving to qualify for moving-expense deductions.
An employee who relocates needs to be working full time for a specified number of weeks during the first year after the move to meet IRS guidelines. If you change jobs or employers but still work full time for the required number of weeks, deducting your expenses is perfectly fine.
The IRS considers that you worked a “full-time week” even if one or more of the following events cause work absence:
- Natural Disaster
If vacation or leave time are permitted by your employee contract, you’re considered a full-time worker during those periods when you take allowable vacation or leave. Contracted seasonal employees are also considered to be working full time even during their off seasons, provided that the off-season period is no longer than six months.
Self-employed taxpayers must meet stricter requirements to qualify for moving expenses. They must show two years of full-time work history after moving to a new location. Some of the above definitions of full-time work apply to the self-employed worker as well.
Going the Distance Matters
Unless you’re a member of the military, your new job location needs to be at least 50 miles farther from where you live than your old job location. For IRS purposes, your new residence doesn’t factor in the equation at all.
The IRS will judge distance based on the shortest route to get from your old residence to your old job. They will use commonly traveled routes, not backroads, to determine the mileage. If the distance from your former residence to your former job is 10 miles, your new job location must be at least 60 miles away from your old residence to allow moving deductions.
Like most IRS rules, there are loopholes. If you are required to live at the new home as a condition of your employment, you don’t have to meet the distance rules. Additionally, if you can prove that you’ll spend less money or time commuting from the new home to the new job, you may qualify for deductions without meeting the distance requirements.
Understanding Moving-Related Expenses Is Key
You should decide whether you will deduct actual expenses or standard per-mileage amounts on your taxes when you claim car-travel expenses for the move. If you decide to deduct actual expenses, your gas and oil expenses during the move are deductible. In both types of deduction plans, you may deduct parking and toll fees directly related to the move.
Some expenses you may deduct for moving items include:
- Packing and crating of goods
- Transporting personal and household goods
- Shipping vehicles or pets
- Utility connections and disconnections
- Storage fees accrued within 30 days of the move
You can’t deduct any old thing and call it a moving expense. Sightseeing or theme park side trips aren’t deductible, and neither are vehicle maintenance expenses or auto insurance premiums. House-hunting expenses, security deposits, and return trips to your residence are also not covered. Business-moving deductions have similar exclusions.
Double Dipping Is Not Permitted
If you’re taking your deductions in the form of business-related moving expenses, you can’t claim the same expenses are personal moving expenses. You must choose which category your lodging and travel expenses will fall under.
If your employer pays part or all of your moving expenses, you must report these payments in one of two ways. If you keep strict records of your expenses and reimbursement and pay back any moving-expense overpayments to your employer, you’ll report the money as non-income from an accountable moving plan.
If the above criteria aren’t met, you must report your moving-expense advances and reimbursements as income on your tax forms.
Before your move, set up a system to keep track of the proof you’ll need to claim your deductions. Keep a large, waterproof envelope in your car for gas receipts and other proof of your moving costs. You can also download apps on your smart devices that help you keep track of your relocation expenses. Keep copies of moving-period utility bills, pay stubs, and other invoices related to the move in another safe envelope.
Count on Elite Truck Rental to furnish you with guaranteed reservations for our clean, comfortable moving vans and trucks. We can set you up with the right van or truck for your in-state or out-of-state move. We also carry moving supplies, including packing boxes, furniture pads, and dollies.