With everything on your mind during a move it can be easy to forget that moving expenses are, in some cases, tax deductible. The first thing I want to make clear is that I am not a tax professional. These are only helpful pointers to make you aware of deductions you may otherwise have missed. If you have any questions about the specifics involved with these deductions I would highly recommend seeking out a tax professional. Also, this is regarding federal taxes only. That being said, let’s see how moving affects your taxes!
Employment is Key!
There are three prerequisites you need to meet to deduct your moving expenses, and the first is that your move must be closely related to the start of work. That doesn’t technically mean you had to have a specific workplace lined up before you moved to your new location. As long as you started working in that location within 1 year of moving there and your new house is closer to the new job than your old house would have been, then you most likely pass the first prerequisite. Note: There are exceptions to this, especially if you are required to live in your new home as a condition of employment. If that applies to you then definitely seek advice from a tax professional before attempting to deduct your moving expenses.
Going the Distance!
The second prerequisite is the distance test. Your new place of work must be at least 50 miles further from your old residency than your old place of work was. For example: I used to work at Jim’s Barber Shop and it was 5 miles from my old house. Then I got a job at Joe’s Barber Shop and it was 56 miles from my old house, which was way too far to commute, so I moved closer to Joe’s. In this case I would meet the prerequisite.
Is Time on Your Side?
The last prerequisite is the time test. This differs on whether you are an employee or self-employed. If you are an employee you must work full time for at least 39 weeks out of the first 12 months after arriving in your new location. All 39 weeks don’t have to be worked at the same company, and they don’t have to be worked in a row. However, all 39 weeks must be worked in the same general commuting area. All of the above is considered the 39 week test. If you are self-employed then the 39 week test applies as well as the 78 week test, which is the same general concept, except the 78 weeks are out of 24 months instead of 12. So for the first 24 months you must work 78 weeks, but they don’t have to be at the same company or worked in a row. Simple, right? Umm… Sure.
In Confusion… I Mean Conclusion!
If you meet the above prerequisites, then congratulations! You can deduct your moving expenses on your federal taxes. Even if you don’t there are exceptions that exist, and that is where the professionals come in. If you have more detailed tax questions don’t hesitate to reach out to the pros, and if you want to do some research on taxes check out the IRS’s website.
Hopefully this got you moving in the right direction!
Do you have any advice for the readers who plan on deducting their moving expenses this year? Leave it in the comments!