Moving? Yes, that's Deductible

My wife and I are moving shortly to a new city and I wanted to know what the rules were for deducting moving expenses.  I knew you could deduct certain expenses but wasn’t sure what so I looked it up.  Thought this might be helpful for anyone facing the same situation in the next year.

Federal tax laws allow you to deduct your moving expenses if your relocation relates to starting a new job or a transfer to a new location for your present employer. (The new job is the applicable scenario for us).  To qualify for the deduction, your new work location must be a sufficient distance from your old home and you must begin working shortly after you arrive.

Distance test requirements

The costs you incur for moves within the same town do not qualify for the deduction. The distance between your new job and your former home must be at least 50 miles farther than your previous employer is from that home. For example, if your previous commute to work was five miles each way, then the distance from your new job location to your old home must be at least 55 miles. The IRS requires you to use the shortest commutable routes between two locations.

Time test requirements

You must work full-time for a minimum of 39 weeks during the initial 12-month period that starts on the day you arrive in the new location. You can still satisfy this requirement when the 39 weeks are not consecutive and even if it is for multiple employers. The IRS does not say how many days or hours you must work each week to be a full-time employee; instead, it defers to your industry’s commonly-accepted standard.  (Who knows what that means??)

Deductible moving expenses

The deduction covers the reasonable expenses you incur to transport your personal effects and household items to your new home. This includes movers, renting a Uhaul, etc.  You can even include the cost of renting a storage unit for up to 30 days if you are unable to move into your new home immediately after leaving your former home.

You can also include the cost of traveling to the new location for yourself and other members of your household. If you drive to the new location in a personal vehicle, you can include the actual cost of oil, gasoline, parking fees and highway tolls. In lieu of using the actual cost of gasoline and oil, the IRS permits you to calculate those costs using the standard mileage rate. For long-distance moves, you can deduct the cost of airline and train tickets.

However, keep in mind that the travel expenses can be for multiple trips if you drive down once to take one of the family cars and your spouse drives down separately to take the other family car to the new location.  Each separate trip is deductible, but you can only deduct expenses for one trip per person.  So in our case I will deduct mileage for one trip for my wife to bring one of our cars and for me to take the other one.  (I figure mileage is easier than trying to add up all the receipts).

You can’t deduct for trips associated with finding housing, i.e. if you make a trip to the new location solely to find a place to live while you are down there.

Claiming the moving expenses deduction

To claim the deduction, you must report all relocation expenses on IRS Form 3903 and attach it to the personal tax return that covers the year of your move.  If you use TurboTax or other software, it’s very simple.