Are There Special Tax Breaks if You Move?

By Danny Vena Markets Fool.com

Moving can be a hassle. It can be time-consuming, overwhelming, and agonizing. Then there's the cost. According to The American Moving and Storage Association, the average in-state move will cost about $2,300, while the average interstate move will cost a whopping $4,300! If you are moving farther or taking more stuff, then the costs can be much higher. With all this cost and hassle, there has to be some upside, right?

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Some help from your long-lost uncle

The good news? Uncle Sam has tax breaks that can help ease the burden. If you're contemplating a move or have already made one that was job- or work-related, be sure to consider these tax breaks. However, before you break out the bubbly, note that you must meet certain criteriain order to claim your moving expenses. Details for all of this can be found in IRS Publication 521. A summary of these requirements follows.

Bet you didn't know there would be a test

First, you must meet the job test. Your move must be closely related to the start of work. You can claim moving expenses that you incurred within one year after the date when you first reported to work at your new location.

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Secondly, you must meet the distance test. Your new job must be at least 50 miles farther from your old home than your old job location was from your old home. It sounds more complicated than it actually is. As an example, if you commuted 15 miles to your old job, then your new job must be at least 65 miles from your old house.

Finally, you must meet the time test. If you're an employee, you must work for at least 39 weeks during the first 12 months after your move. You don't even have to work those 39 weeks in a row, or even for the same employer -- just work! If you're self-employed, then you must work 78 weeks during the first 24 months.

Even if you haven't yet met the time and distance tests and the time has come to file your tax return, you can claim the moving deduction if you expect that you will meet those tests. Also, if you are married and file a joint return,only one spousemust meet the time and distance tests. Careful, though: If you don't eventually meet those tests, then you'll need to add the deduction to the current year's income or file an amended return.

You pass!

Once you've passed all of the required tests (whew!), you're ready to start claiming your deductions. For most, the cost of the moving company is the biggest moving expense. Even if you don't use professional movers, the costs of packing, crating, and transporting your household goods and personal property are deductible. If you pay to have your car shipped, you can deduct those charges. You can even deduct the costs to ship your pet! We wouldn't want you to leave Fido behind.

It's the little things

Don't forget all of the smaller costs related to the move, because they can add up. These include:

  • Packing materials, e.g., moving boxes, wrapping paper, bubble wrap, tape, and markers.
  • Costs to connect or disconnect utilities.
  • $0.19 per mile for 2016 (down from $0.23 in 2015) if you drive to your new home.
  • The cost of lodging expenses along the way.
  • Storage fees within the first 30 days.

Declutter and donate

As you're getting ready to move, you may realize you have a lot of unused stuff that you'd rather not have cluttering up your new home. Rather than throwing it out, you can donate it to charity and receive a tax deduction -- regardless of whether you're eligible to deduct your moving expenses.Many of those unwanted items would gladly be accepted by Goodwill, The Salvation Army,or another local charity. You must keep meticulous records of the items donated, the charity, the dates, and the total value of what you have donated. In most cases, the donations' values are what you would pay for them at a thrift store, not what they cost new. Keep an itemized list for each donation and get a written receipt from the charity. Also keep in mind that these charities don't want an item that belongs in the dump. The IRS requires that items be in good used condition or better. For more details, be sure to check IRS publication 561.

Moving can be a hassle. It's a lot of work to pick up roots and start again. Having Uncle Sam take a smaller tax bite might help to ease that burden. Be sure to check with your tax professional for specific advice on responsibly maximizing your tax savings.

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