In today's mobile society, few people spend their lives in a single location, let alone a single city. People are constantly moving, many for better jobs, in hope for a better lifestyle.
Moving expenses are tax-deductible if you meet certain qualifications. And the best part is you don't have to itemize to claim them. Moving expenses are considered "above-the-line" deductions. That means that you can claim them in addition to your standard deduction or your itemized deductions.
You can deduct moving expenses if you moved to a different home because of a change in job locations or if you started a new job. You can take the deduction whether you are self-employed or an employee. However, you must pass three tests: the working test, the distance test and the time test.
Working test
You have to be able to justify the move as job-related. That doesn't mean you have a job lined up before you make the move. But you do have to be working within a year of the move.So if you worked for a big company and then moved 500 miles and bought a coffeehouse within a year, you pass the test.
Distance test
This sounds complicated, but it really isn't. Your new job location must be at least 50 miles farther from your former home than was your former job location. For example, if your old workplace was three miles from your old home, your new workplace must be at least 53 miles from that home. If you did not have an old workplace, your new workplace must be at least 50 miles from your old home.Your principal job location is usually the place where you do most of your work and spend most of your time. A new principal job location is a new place where you will work on a permanent or indefinite basis rather than on a temporary basis.
If you work for a number of employers on a short-term basis or if you get work under a union hall system (such as many construction and building trades), use the distance between your home and the union hall.
Time test
To deduct your moving expenses, you must also meet one of two time tests:If you are an employee, you must work full time at least 39 weeks during the 12 months after your arrival in the general area of your new job location. You don't have to work for one employer for the 39 weeks, nor do you have to work 39 weeks in a row. But you must work full time within the same general commuting area.
Whether you are employed full time depends on what's typical for your type of work. A schoolteacher on a 12-month contract who teaches on a full-time basis for more than six months is considered a full-time employee for the entire 12 months. Alternatively, if your work is seasonal, you are considered working full time during the off-season weeks if your contract or agreement covers an off season of fewer than six months.
You are considered to be working during any week you are temporarily absent from work because of illness, strikes, natural disasters or the like. You are also considered to be a full-time employee during any week you are absent from work for leave or for vacation that is provided in your work contract or agreement.
If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and a total of 78 weeks during the 24 months after your arrival in the area of your new job location. Whether you perform services during a given week depends on the custom of your type of work in your area.
The time test doesn't have to be met if any of the following apply:
- Your job ends because of disability.
- You are transferred for your employer's benefit.
- You are laid off or discharged for a reason other than willful misconduct.
- You died and the expenses are being claimed after your death.
Neither the distance test nor the time test has to be met if you are a member of the armed forces and your move is due to a permanent change of station.
An important point: If you are living in the United States, retire, then move and remain retired AFTER the move, you cannot deduct your moving expenses. So, if you're retired and move from, say, Chicago to Arizona, the moving expenses are not deductible.
What's deductible?
You may deduct the following expenses incurred in moving your family and dependent household members:- The actual costs to pack, crate and move your household goods and personal effects are deductible. In one case, a Marine officer's moving expense deduction included the cost of moving his boat. You may also include the cost of storing and insuring household goods and personal effects within any period of 30 days in a row after the items were moved from your old home and before they were delivered to your new home.
- The actual costs of travel from your old home to your new home. These include transportation and lodging on the way and costs for the day you arrive. You may include expenses for only one trip per person. Expenses for personal employees such as a maid, nanny or nurse are not deductible.
If you use your own car, you may deduct either the actual out-of-pocket expenses for gas and oil or mileage. In 2009, the mileage rate is 24 cents a mile. Parking fees and tolls are added to either method.
You no longer can deduct items such as pre-move house-hunting trips, temporary living expenses and the costs associated with selling your old home as moving expenses. If an employer pays for a pre-housing hunting trip, the associated costs will be included as income to you on your W-2 form.
You deduct all of your qualified moving expenses. Any reimbursements from your employer are then subtracted to give you your net allowable deduction.
Depending on state and local taxes, as much as half of your moving costs may be paid for by Uncle Sam.