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What moving expenses are tax deductible?

January 26th, 2018 - 8:49 AM

Does my move qualify for moving expense deductions?

 

Did you move in 2017? You might be able to list moving expenses on your taxes and deduct them. There are certain requirements to meet in order to take advantage of these deductions — take a look at the qualifications, special circumstances (like military moves and those affected by natural disasters) and how the process works.

moving expenses and tax deductions

How to deduct expenses for a move

Based on the information found in the IRS document Publication 521, a move must pass three criteria in order to qualify:

  • Be closely related to the start of work
  • Meet the time test
  • Meet the distance test

Take a closer look at those three things to see if you meet the requirements.

Closely related to the start of work

The “closely related” rule means that a move to a new home must be related to where the job is (more on that in the distance test) and when you started. You should meet this requirement as long as you had the job within a year of moving, but there are some exceptions for moving outside of the one year mark. For example, if you were waiting for children to finish school before selling a house and moving, it may still be possible to deduct expenses. A tax professional can help determine if the specific situation qualifies or not.

The time test

Get out a calendar for this one. The time test requires full-time employment for at least 39 weeks (9 months) in the new general area during the first 12 months after arrival. So, if you moved in January of 2017, started work in February and retained full-time status at least through November, you’ll meet this condition.

For self-employed individuals, the amount of time doubles — at least 39 weeks during the first 12 months and at least 78 weeks (18 months) during the first 24 months after arriving.

If you haven’t completed all 39 weeks (or 78 weeks if self-employed) before filing taxes, you can still apply the deduction. However, if you don’t meet it after receiving the deductions, then go back and amend the tax return.

Vacation time, illness, strikes, lockouts, seasonal work or other absent time still qualify as full-time work since you would have been working if the absence hadn’t occurred. You don’t have to work for the same employer for the entire time or even be in the same trade. As long as you’re working in the new geographical area, it qualifies.

The distance test

For this test, you need to know two things:

1.       The miles from the old home to the new workplace

2.       The miles from the old home to the old workplace

If the distance of 1 minus 2 is greater than 50 miles, you pass the distance test. If there are multiple jobs, use the “main job location” — where you spend the most working time or where the most money is earned if time spent is even. If this is your first job or return to the workplace, the place of work must be at least 50 miles from the former home.

Married couples filing jointly need to have only one spouse who meets the time and distance tests to qualify for moving expense deductions. There are exceptions including death, disability or involuntary separation, so be sure to consult a tax professional.

Pass all three tests?

Congrats! You can deduct moving expenses.

Special tax circumstances

  • International Moves. Some moves to and from the U.S. qualify for tax deductions, but there are many criteria to consider including line of work, foreign income and other situations. Use the Interactive Tax Assistant from the IRS to see if the move qualifies.
  • Military Moves. The only qualifying military moves are those that occurred as a result of a Permanent Change of Station (PCS), including home to the area of the first post of duty, from one duty post to another and to the last post of duty or a nearer point in the U.S. (within one year of ending active duty). You aren’t required to pass the time or distance tests. If a military spouse or dependents move to or from separate locations, the moves are treated as a single move and expenses are combined and deducted together on the same return. Read more about military deductions.
  • Those affected by natural disasters. While natural disasters occur every year, 2017 had multiple large events including hurricanes, floods and wildland fires. Time off due to natural disasters counts towards the full-time work requirement, since the absence isn’t in your control.
  • Moves with employer reimbursement. Expenses paid are deductible, but those paid by an employer are not. In fact, if you were reimbursed for a move, the payment must be included as income when filing taxes.

Deductible moving expenses

Travel by car

You have two options when it comes to deducting car travel. Either keep track of the oil and gas expenses (with receipts, bills or credit card statements), or keep a mileage log and deduct 17 cents per mile (in 2017). If filing for past years, the standard rate per mile was 19 cents in 2016 and 23 cents in 2015.

Packing and moving

You can deduct the costs of packing, crating and transportation. This includes:

  • Hiring movers
  • The costs associated with connecting or disconnecting utilities
  • Vehicle shipping
  • Shipping household pets
  • Lodging during travel (including the day of arrival)
  • Storage and insurance in transit — the cost of storage for up to 30 days after the move. For example, if you can’t move into a new home immediately and have to store belongings for a month, those costs are deductible.
  • The cost to actually move all belongings — for example, the cost to use U-Pack® or a rental truck
  • Travel by air or train for long distance moves

You can only deduct expenses for one trip per person, but you don’t have to travel at the same time.  For example, if there were multiple trips back and forth for the same move, you can only deduct one trip when filing taxes. But if you arrived weeks before your spouse, both sets of travel expenses are deductible. You should also take the most direct route, deducting expenses for the most reasonable circumstances, so taking the scenic route for sightseeing isn’t deductible.

If you own your own business, items can only be deducted once, either personally or for business.

Non-deductible moving expenses

The following expenses cannot be deducted for a move (check with the IRS for any additional items that cannot be applied):

  • Any part of the purchase price of a new home
  • Cancellation fees or investment loss due to early termination of club/organization memberships
  • Car insurance
  • Car tags
  • Vehicle depreciation
  • Driver’s license
  • Expenses of buying or selling a home
  • Expenses acquired from signing or breaking a lease
  • Food expenses/meals
  • Furniture purchased for the new home
  • General vehicle maintenance
  • Home improvements to help sell the home
  • Loss on the sale of a house
  • Mortgage penalties
  • Pre-move house hunting expenses
  • Real estate taxes
  • Refitting of carpet and draperies
  • Remodeling a new home
  • Return trips to the former home
  • Security deposits
  • Storage charges (outside of the 30-day period as stated above)
  • Temporary living expenses
  • Tips for the movers

Important things to note before deducting moving expenses​

  • Keep all receipts and records. Accurate records are vital when filling out taxes. Hang onto receipts, statements, bills, mileage logs, the Bill of Lading and any other documents. If you moved with U-Pack in the last year, get a copy of your Bill of Lading online using your tracking number and U-Pack reference number.
  • Change your address with the IRS. Complete a Form 8822 to ensure you receive any official correspondence.
  • File by the due date! This year, federal tax filing season begins January 29, and returns are due by April 17 (since the typical date of April 15 falls on a Sunday). State deadlines vary, so make sure to get returns in on time (if you moved during the year, there might be two states to file with).

Have questions about moving deductions?

For specific tax-related questions, we recommend calling your tax advisor or reaching out to the IRS at 1-800-829-1040. You can also visit your local IRS office. For help locating U-Pack documents needed for filing taxes, leave us a comment below. We’re here to help. 

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