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Moving
expense deduction:
If you move to
a new home because you started a new job or changed your job location,
you may be able to deduct your moving expenses. This is true whether
work for someone else or are self-employed. As this tax tip explains,
you must first meet two tests: the distance test and the time test.
Distance
test
The first
test you must meet to deduct moving expenses is the distance test.
Your new job location must be at least 50 miles further from your
old home than your old job location was. For example, your old
job was five miles from your old home. Your new job must be at
least 55 miles from your old home.
The moving
expense deduction is only available for job-related moves. The
distance between your new home and your old home is irrelevant.
It is the distance between the two jobs that matters. Your new
home must be at least 50 miles from your old home. However, you
didn't change jobs or job locations. You can't deduct your moving
expenses.
Time
test
If you meet
the distance test, you must next determine if you have satisfied
the time test. Conditions for meeting this test differ for employees
and self-employed individuals. If you are an employee, you must
work as a full-time employee in the general area of your new job
location for at least 39 weeks of the first 12 months you are
in this new location. If you are self-employed, you must work
full-time in the general area of your new job location for at
least 39 weeks during the first 12 months and for at least 78
weeks during the first 24 months you are in this new location.
Many taxpayers
haven't met this test by the deadline for filing their income
tax return. How can they possibly deduct their moving expenses?
For example, if you moved at the end of 1998, it is impossible
to meet the time test until at least 39 weeks into 1999. Your
tax return is due before this 39-week period ends. The good news
is that you can still deduct the expenses on your 1998 return
as long as you truly expect to meet the 39-week test or, if self-employed,
the 78-week test.
If you later
realize that you didn't meet the test, you must either amend your
1998 return to delete the expenses or include these amounts previously
deducted in error as other income on a subsequent year's return.
On the other hand, if you didn't deduct the expenses thinking
that you wouldn't meet the time test but later on you do meet
the test, you must amend the original return to deduct the expenses.
Qualifying
expense
You can deduct
the reasonable expenses of moving your household goods and personal
effects and traveling to your new home. Travel costs include lodging
and exclude meals. If you drive your car to your new home, you
can deduct car expenses in one of two ways:
- Actual
expenses such as gas, oil, parking, or tolls; or
- Mileage
method assessment of 10 cents a mile.
There are
several unique expenses that are deductible:
- The cost
of storing and insuring household goods and personal effects
for any 30-day period after they are moved from the old home
and before they are moved to the new home.
- Any costs
of connecting or disconnecting utilities required since you
are moving household goods, appliances or personal effects.
- The cost
of shipping your car and household pets to your new home.
- The cost
of moving household goods and personal effects from a place
other than your former home (e.g., your parents' home).
- Lodging
expenses in the area of your former home within one day of leaving
the former home.
- Travel
and lodging expenses in the area of your new home on the day
you arrive.
Unfortunately,
there are some major expenses that don't qualify for the deduction:
- House-hunting
expenses prior to the move.
- Temporary
living expenses once you arrive.
- Meals
- Expenses
of buying or selling a home.
Employer
reimbursements
Generally,
if your employer reimburses your actual moving expenses, the reimbursement
isn't included in your taxable wages. Since the reimbursement
isn't taxable, the expenses aren't deductible. However, taxable
wages always include any reimbursement of non-deductible moving
expenses such as house-hunting expenses or meals. If the employer's
reimbursements exceed the actual moving expenses, the excess is
included in taxable wages.
Where
do you deduct the expenses?
Compute the
deductible expenses on Form 3903 Moving Expenses. The deduction
is an "above-the-line" write-off. That is, it reduces adjusted
gross income (AGI).
You can take
this deduction whether you itemize deductions or claim the standard
deduction.
Be sure to
consult with a tax advisor for proper planning and implementation
of tax savings ideas to be sure they are right for you.
C.
David Pitzer, CPA, PC
118
Two Mile Pike
Goodlettsville, TN 37072
(615) 851-2727
Fax: (615) 851-8711
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