Your Guide to Deducting Moving Expenses

Moving is expensive, so wouldn’t it be great if your move was entirely tax deductible? It used to be the case that if you relocated for a new job or moved specifically to seek work you were entitled to some sort of refund. Unfortunately, that’s not quite how it works anymore. But there are situations where you can deduct some of the expenses related to your move and save on your yearly taxes. Whether or not you can get away with deducting moving expenses depends on the specifics of your situation, so it’s important to know what does and does not qualify. Below, we’ll break down what you need to know to figure out what expenses (if any) you can deduct.

Step one: Make sure you meet the three requirements

There are only three tests required to deduct moving expenses, but you’ve got to pass all of them.

1. Your move has to be “related to starting work.” For deducting moving expenses, your relocation must take place within one year of the time you report to work at your new job. That doesn’t mean you have to be relocating for work, just that your first day at a new job takes place within a year time-frame of your move. This can apply retroactively, too—for example, if you start work on June 15 but don’t transport your belongings from your old home until August 15. As long as the relocation and first day on the new job happen within one year of each other, you pass this test.

2. Your move must meet the distance requirement. In order to qualify, the location of your new job must be at least 50 miles farther from your previous home than the location of your old job.

To figure out if you pass the distance test, calculate the distance from your previous residence to your old place of work and subtract that number from the distance from your previous residence to your new place of work. If the difference is at least 50 miles, you’re good to go. You should have no problem meeting this requirement if your move is out of state.

3. Your move must meet the time test. To satisfy this last requirement, you’ll need to be able to prove that you either:

(a) worked as a full-time employee for at least 39 weeks in the year following your move, or

(b) worked full-time as a self-employed individual for at least 39 weeks in the year following your move and at least 78 weeks during the two year period following your move.

If you are both employed and self-employed, use the requirements that apply to your principal place of work.

There are some caveats to this test if you are not self-employed. Primarily that you are not required to work for the same employer during all 39 weeks and you do not have to work all 39 weeks in a row. You are required, however, to work within the same general commuting area for the entire 39 weeks.

Step two: Find out if you have an exception

If you don’t pass the three tests above, you may still qualify for deductible moving expenses if you meet any of the exceptions below.

• If you work outside of the U.S. and relocate back to the country after retirement you are entitled to deduct moving expenses even though you are not starting work at a new location.
• If you are an active member of the military you are exempt from the distance test as long as you are relocating due to a permanent change of station.
• The time test does not have to be met if you:
  • are the surviving spouse of an individual who worked abroad and you are relocating to the U.S. following your spouse’s death;
  • are transferring to a new location for your employer’s benefit during the first year of your move or if you are laid off for any reason other than willful misconduct;
  • lose your job because of disability or death.

  Step three: Know what’s deductible and what’s not

  If you pass the three tests and qualify to deduct moving expenses, the next step is figuring out exactly what you can deduct.

  Here’s what you can deduct:

  • Professional moving services
  • Truck and equipment rental for a do-it-yourself move
  • Fuel consumption if traveling by car
  • Packing supplies (including boxes, packing tape, and packing blankets)
  • Moving insurance
  • Certain travel expenses, such as lodging costs
  • Storage for the period in between leaving your old home and settling in at your new one, for a maximum period of 30 days
  • Moving assistance (for example, if you hire someone to come help you unload your truck upon arrival)

  Here’s what you cannot deduct:

  • The cost of buying or renting a home in your new location
  • Expenses related to breaking your lease or selling your home at your old location
  • Meals during the travel period
  • House-hunting costs for travels prior to your actual move
  • Expenses that your employer already reimbursed you for

  Keep in mind that all deductible expenses have to be from one trip. If you make multiple trips related to your move (for example, if you relocate for a new job and transport your belongings a month later) only one of those trips will be deductible.

  Step four: Deduct your expenses correctly

  There are a few things to know about how to properly deduct your moving expenses.

  Deductible moving expenses do not have to be itemized in order to be claimed; you just need to know the total cost of all related and qualifying expenses. However, you will have to break down your moving related spending on IRS Form 3903.

  The relevant section for deducting moving expenses can be found “above the line” (meaning it’s taken directly from what’s considered your gross income for the year) on the first page of Form 1040 under Adjustable Gross Income, line 26. You are allowed to take the moving expense deduction in addition to claiming standard deductions or itemizing your deductions. One does not preclude the other.

  While it may not be easy to qualify for deductible moving expenses, the process of taking the deductions is pretty straightforward once you know that you’re eligible. If you have any questions relating to deducting your moving-related expenses, ask your tax preparer for additional guidance.