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Moving Expenses
By Dr. John L. Stancil
Tax Analyst, WebTaxCenter.com
Moving expenses are reported on Form 3903 and are deductible on page 1 of the 1040. You do not have to itemize your deductions in order to deduct these expenses.
You can deduct certain moving expenses only if you meet all three requirements established by the IRS:
Work Related Test - The move is related to a change in your work. The expenses must have been incurred within one year of the date you first reported to work in your new location. However, certain circumstances will be taken into account and expenses incurred after the one year period may be deducted. For example, if your family does not move within a year of your starting work in order to allow a child to complete high school, this would be acceptable.
Distance Test - The move must meet the distance test. You new job must be 50 miles further from your former home than your old job was from your former home. For example, in your old job you drove 5 miles to work each day. If you change jobs, the new job must be 55 miles from your old home to meet this test.
If this is your first job or a return to full-time work, your new job must be 50 miles from your former home to meet the test.
If you are in the Armed Forces and moved because of a permanent change of station, you do not have to meet this test.
Your main job location is the place where you spend most of your working time or your "work center." If you are a union member and work for several employers on a short-term basis, your main job location is the union hall.
If you have more than one job at any time, your main job is determined by the time at work, the amount of work you do, and how much you earn at each place.
Time Test - To meet the time test you must be employed in the new job for 39 weeks. A self-employed individual must meet a 78-week test in the new location. The 39 weeks does not have to be for the same employer, and they do not have to be consecutive weeks. All 39 weeks must be in the same general commuting area, however.
If you file a joint return, you meet this test if either you or your spouse meet the time criteria. You cannot add your spouse's weeks to yours to meet the test.
If you have not met the time test by the due date of your return, it is presumed you will meet the test and the moving expenses may be deducted. If you do not eventually meet the test, you must file an amended return for that year.
If you do not take the moving expenses until you meet the time test, you must file an amended return for the year in which the expenses were incurred. You cannot deduct them in the year you meet the test unless they were incurred in that year.
There are five exceptions to the time test. If any of the exceptions apply to you, you do not have to meet this test.
- You are a member of the Armed Services and moved due to a permanent change of station.
- Your main job was outside the United States and you moved to the U.S. because you retired.
- You are a survivor of a person whose main job location was outside the U.S. at the time of death.
- Your job at the new location ends because of death or disability.
- Your are transferred for your employer's benefit or laid off for a reason other than willful misconduct.
Normally, you must be moving to a new job in order to deduct moving expenses. If you are living in the United States, retire, then move, you cannot deduct moving expenses. There is an exception for those living outside the United States. To qualify both your former main job location and your former residence must have been outside the United States.
If you intend to be permanently retired you can deduct moving expenses from your home outside the United States to your retirement location within the U. S. You may later return to work at a later time if you decide to. Your intention to permanently retire is determined by:
- Your age and health
- The usual retirement age for people in your line of work
- If you receive retirement benefits from a retirement fund
- The length of time before returning to work.
- The move is to a home in the United States.
- The move begins within 6 months after the decedent's death.
- The move is from the decedent's former home.
- The decedent's former home was outside the U. S.
- The decedent's former home was also your home.
In the past, a number of items qualified as deductible moving expenses. However, in recent years the costs that are considered deductible moving expenses has been severely reduced. The cost of temporary lodging in your city and house hunting trips prior to moving are no longer deductible.
You can deduct the cost of moving your household goods and personal effects for you and members of your household. This includes the cost of packing, crating, and transporting these goods. You can also deduct the cost of shipping your car and your household pets.
If you do not move into your new home immediately, you may deduct the cost of storing and insuring your household goods for up to 30 days.
You can also deduct the cost of traveling to your new home. This includes lodging and expenses of travel. Meals are not deductible. If you travel by car, you can deduct actual expenses or 22 cents per mile. Travel is limited to one trip per person.
Reimbursements
If you are reimbursed by your employer and make an accounting to the employer for the reimbursed expenses, the reimbursements are not taxable income to you and not reported on your W-2. These reimbursed expenses will not be deductible.
If you are given a lump sum and do not make an accounting to your employer, the reimbursement is under a non-accountable plan. These reimbursements will be included on your W-2 and are taxable income. Expenses you incur are deductible.
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Dr. John L. Stancil, a tax analyst for WebTaxCenter.com, has been a member of the Florida Southern College faculty since 1998. He received his bachelors degree from Mars Hill College and holds a M.B.A. from the University of Georgia. He later earned his doctorate in accounting from the University of Memphis. He holds four professional certifications, including CPA, CMA, CFM and CIA. Stancil has received the Florida Institute of CPAs 2005 Outstanding CPA in Public Service Award. (This award is given annually to a Florida CPA who has demonstrated significant contributions through community and civic activities.) He has also been recognized as the Expert of the Month on several occasions by allexperts.com.
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