Moving Tax Deductions: Deductible Expenses

This is the second of two posts on tax deductions related to moving. In the last post I described the tests the IRS uses to determine whether a move is eligible for tax deductions or not. This post describes what types of moving expenses are deductible.

Most of this information is taken directly from the IRS website: however, it is vital that you check with your tax professional on any information you find here.

For deductible expenses, the IRS writes the following:

If you meet the requirements under Who Can Deduct Moving Expenses, earlier, you can deduct expenses for a move to the area of a new main job location within the United States or its possessions. Your move may be from one U.S. location to another or from a foreign country to the United States.

Household goods and personal effects.

You can deduct the cost of packing, crating, and transporting your
household goods and personal effects and those of the members of your household from your former home to your new home. For purposes of moving expenses, the term “personal effects” includes, but is not limited to, movable personal property that the taxpayer owns and frequently uses. If you use your own car to move your things, see Travel by car, earlier.

You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or
personal effects.

You can deduct the cost of shipping your car and your household pets to your new home.

You can deduct the cost of moving your household goods and personal effects from a place other than your former home. Your deduction is limited to the amount it would have cost to move them from your former home.

Example.

Paul Brown has been living and working in North Carolina for the last 4 years. Because he has been renting a small apartment, he stored some furniture at his parents’ home in Georgia. Paul got a job in Washington, DC. It cost him $900 to move the furniture from his North Carolina apartment to Washington and $3,000 to move the stored furniture
from Georgia to Washington. It would have cost $1,800 to ship the stored furniture from North Carolina to Washington. He can deduct only $1,800 of the $3,000 he paid. The amount he can deduct for moving his furniture is $2,700 ($900 + $1,800). You cannot deduct the cost of moving furniture you buy on the way to your new home.

Storage expenses.

You can include the cost of storing and insuring household goods and
personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home.

Travel expenses.

You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. This includes expenses for the day you arrive.

You can include any lodging expenses you had in the area of your former home within one day after you could no longer live in your former home because your furniture had been moved.

The members of your household do not have to travel together or
at the same time. However, you can only deduct expenses for one trip per person.

Example.

In February 2008, Josh and Robyn Black moved from Minneapolis to Washington, DC, where Josh was starting a new job. Josh drove the family car to Washington, DC, a trip of 1,100 miles. His expenses were $209 for mileage (1,100 miles x 19 cents per mile) plus $40 for
tolls and $150 for lodging, for a total of $399. One week later, Robyn flew from Minneapolis to Washington, DC. Her only expense was her $400 plane ticket. The Blacks’ deduction is $799 (Josh’s $399 + Robyn’s of $400).

Here is the IRS take on nondeductible expenses:

Nondeductible Expenses

You cannot deduct the following items as moving expenses.

• Any part of the purchase price of your new home.
• Car tags.
• Driver’s license.
• Expenses of buying or selling a home (including closing costs, mortgage fees, and points).
• Expenses of entering into or breaking a lease.
• Home improvements to help sell your home.
• Loss on the sale of your home.
• Losses from disposing of memberships in clubs.
• Mortgage penalties.
• Pre-move househunting expenses.
• Real estate taxes.
• Refitting of carpet and draperies.
• Return trips to your former residence.
• Security deposits (including any given up due to the move).
• Storage charges except those incurred in transit and for
  foreign moves.

No double deduction. You cannot take a moving expense
deduction and a business expense deduction for the same expenses.
You must decide if your expenses are deductible as moving expenses or as business expenses. For example, expenses you have for travel, meals, and lodging while temporarily working at a place away from your regular place of work may be deductible as business expenses if you are considered away from home on business. Generally, your work at a single location is considered temporary if it is realistically expected to last (and does in fact last) for one year or less).

Whew! This was a long one, but I hope it offers you enough information to
stay out of trouble on taxes. For more tips and advice, please visit our
homepage, http://www.movers-edge.com/.

Moving Tax Deductions: Qualifying

Moving is an experience most people dread. Not only is it stressful, its expenses often run in the thousands of dollars. One silver lining is that those moving expenses are often tax-deductible. This article details the IRS guidelines on tax deductions for moving. IMPORTANT NOTE: These are guidelines based on material published by the Internal Revenue Service.

This topic will be divided into two posts:

• Today’s post will focus on whether you (and your move) qualify to get any tax deductions
• Tomorrow’s post will focus on what kind of moving expenses are tax-deductible.

Qualifying for the Deduction

There are two basic ways to qualify for moving-related deductions:

• Passing two IRS requirements for moving deductibility because of your job: the distance test and the time test
• Qualifying under special circumstances

You will have to meet all the requirements under one of these two methods for any of your expenses to qualify.

The Distance Test

The IRS wants to determine that your new job is more than 50 miles further from your old house than your old job was from your old house.

Sound complicated?

It isn’t once you get familiar with it. Let’s break it down to make it easier. There are only four numbers involved.

First, calculate how far your old job was from your old house. Let’s say that was 10 miles. We’ll call this the “old house, old job distance.”

Next, calculate how far your new job is from your old house. We’ll say that this distance is 75 miles. We’ll call this the “old house, new job distance.”

Third, we need to subtract the “old house, old job distance” (10 miles) from the “old house, new job distance” (75 miles). That difference is 65 miles (75- 10 = 65). We’ll call this the “old job vs. new job distance.”

There’s only one step left. If your “old job vs. new job distance” is greater than 50 miles, you pass the distance test! If it’s less than 50 miles, I’m afraid your move doesn’t qualify.

The Time Test

Fortunately, the time test is a bit easier. If you spend 39 weeks out of the first 52 weeks at your new job as a full-time employee, you pass. If you’re self-employed, you need to spend 78 weeks out of the first 2 years at your new job. Again, as long as you meet this standard, you pass the test.

Special Circumstances

While there are many special circumstances that can affect your eligibility, I’ll just mention 3:

• Armed Forces. If you are in the Armed Forces and you moved because of a permanent change of station, you do not have to meet the distance test. See Members of the Armed Forces, later.
• Main job location. Your main job location is usually the place where you spend most of your working time. This could be your office, plant, store, shop, or other location. If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work.
• Union members. If you work for several employers on a short-term basis and you get work under a union hall system (such as a construction or building trades worker), your main job location is the union hall.

Next time we’ll go over which moving expenses may be tax-deductible.