The topsy-turvy real estate market and anemic job market have made Americans more mobile as they follow the job openings.
If you find yourself in a job-related move, whether it’s because you are changing job locations or starting a new job, you may have expenses that you can deduct on your income tax return. You can deduct these expenses whether you itemize deductions or take the standard deduction, and the deduction is computed on IRS Form 3903. The allowable moving expenses are then listed as an adjustment to income on Line 26 of Form 1040. But first, you must determine if you qualify under the time and distance tests. Fasten your seat belts, this can get a little confusing:
Time Test: The move must occur within one year of reporting to work at the new location. This is true unless you can prove that circumstances prevented you from moving within that time frame. Once you arrive at the new location you must work full time for at least 39 weeks during the first 12 months after you arrive.
Here’s the problem: Say you incurred your moving expenses in December and you file your tax return in February, the 39-week time test has not yet been met. So what do you do if you quit or get laid off before the 39 weeks are up? You have a choice: You can either amend your income tax return or in the following year you can show the moving expenses you deducted as other income on Line 21 of Form 1040.
Distance Test: If your new job location is at least 50 miles farther from your former home than your old job location was from your former home, then you have met the distance test. You can also meet this requirement if you are required to live at your new home as a condition of employment, or you will spend less time or money commuting from your new home to your new job. If this is your first job or if you are returning to work after a substantial period of part-time work or unemployment, your place of work also must be at least 50 miles from your former home.
Special rules apply to self-employed individuals, seasonal workers, union workers who work more than one job, members of the Armed Forces and for moves outside the U.S. You should check with your tax pro or read IRS Publication 521 available at www.irs.gov.
You may deduct mileage at a rate of 16 ½ cents per mile for 2010 or the actual expenses incurred for gas and oil if you keep an accurate record of those expenses. Parking fees and tolls are also deductible. You cannot deduct the cost of repairs, oil changes, general maintenance, insurance, or depreciation on your vehicle.
Other travel expenses include airfare and lodging for you and all members of your household, but not meals. If you had to pay to stay overnight in the area of your former home because your furniture had already been moved or pay to stay overnight at the new location because your furniture had not yet arrived, you may also deduct that cost. Members of your household don’t have to move at the same time you do to qualify for deducting the expense, but only one trip per person can be deducted.
Packing, transportation and storage of your household goods and personal effects are deductible as well, as is the cost of shipping your car and pets. You cannot however, write off the cost of shipping any furniture you buy on the way to your new home.
Don’t try to write off any side trips you take either; if you’re going cross country and you veer off course to go sightseeing leave those costs off your calculations. You are allowed to take the costs incurred for the most direct route available.
Other costs you cannot deduct include: return trips to your former residence, expenses of selling your home or breaking a lease, pre-move house hunting trips, losses on the sale of your home, loss of security deposits and storage charges not incurred for transit and for foreign moves. If you have expenses that aren’t categorized in this article, check with your tax pro to ascertain their deductibility.
Form 3903 is very easy to complete--it’s only five lines long—and you basically add up your expenses then subtract any reimbursements received from your employer.
Keep an accurate record of your moving expenses: This includes receipts, bills, cancelled checks, credit card statements and mileage logs in case you are audited.
As a final note, make sure you notify the IRS of your new address by filing Form 8822, Change of Address
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know,” available at all major booksellers. Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.