Memorial Day began as the day we remember those who have died in the service of our county. It has expanded to include all those we love who have passed away. It's also the start of summer and a time to celebrate school vacation. But it’s always seemed to me that Memorial Day is also the start of the moving season. Graduates moving to their first jobs, moms and dads who waited until school was out to follow a new job and people who decide it’s a good time to make a change in their life. Each weekend during late May and early June moving vans, neighbors with trucks and rental rigs are loading and hauling household goods to a new location.
Sometimes the cost of that move can be a deduction on the taxpayer’s tax return. Moving Expenses are a deduction. That is they reduce the amount of income which is taxed. The deduction begins on Form 3903 and is shown on the 1040 in the adjustment to income section on line 26.
As with any tax deduction there are some very specific requirements to meet to deduct moving expenses. First, the move must be related to the start of work. The move has to be within a year of starting a job in a new location. The move can be before or after you start the job. So, deciding to move after working at a job for 3 years is not an eligible move.
The move must also meet a distance tax. You’ll need to have the miles from your new job to your old home and from the old job to the old home. The difference must be over 50 mile. For example, you commuted 5 miles one way to your old job. The new job is 56 miles from your former home. You meet the distance test by one mile (56-5=51) but if the original commute was 10 miles one way your moving expenses won’t qualify (56-10=46 miles).
Finally, you have to work full time at the new location for 39 weeks of the first year (or 72 weeks of the first 2 years if you are self-employed). There are some exceptions to the work time requirement. Disability, transfer by your employer, a military move and being laid off (not fired). If you think these will apply to you, check with your tax pro.
What expenses are deductible? The costs to store and transport your household goods are deductible. Storage costs are limited to 30 days however. And one trip to move you. That could include mileage, lodging, train/plane/bus fare. It doesn’t include meals or any costs of house hunting. And these expenses must have been paid by you. If your employer is paying for the move, you can’t deduct the expenses they paid for. If you’re not sure, look at box 12 on your W-2. A “P” entry shows the amount of moving expenses your employer paid on your behalf.
If you are planning a work related move and you think you might qualify for the moving expense deduction, save your receipts and track your miles and talk to your tax pro to make sure you qualify.