Moving expenses are an often overlooked tax deduction. However, there are situations in which you can claim the cost of hiring moving companies on your taxes. You might qualify if your move is related to employment. The IRS has strict guidelines concerning this deduction. Here’s how to determine if your moving expenses qualify for the deduction. Remember to always consult a licensed CPA about your specific situation.
Can you pass the IRS distance test? Your new home must be 58 miles farther than your prior workplace was from your previous home. If you were unemployed or self-employed, then your old home must be at least 50 miles from your new workplace.
IRS form 3903 provides more information about the distance test. There is also a worksheet to help you determine if you pass the test.
The IRS time test requires 39 weeks of fulltime employment during the 12 months after your move. If you move late in the year, then you’re unlikely to pass this test. A late move would make it impossible to meet the 39 week requirement before the tax year ends. And you can’t claim the deduction in the following year.
The IRS addresses this problem with a simple solution. You can take the deduction if you will work fulltime for at least 39 weeks after the move. If you still fail to meet the requirement, then you’ll have to report the deduction as income on your next tax return.
Exceptions to the time test include the following situations:
– You’re in the military and moving because of a permanent station change.
– Your job ended early because of a disability.
– You lost the job through no-fault of your own.
– You were transferred by your employer.
The following expenses may be included if you qualify for the deduction. Be sure to keep track of receipts and other documentation in case you get selected for a tax return audit. In general, travel costs, packing and shipping expenses, and utility fees are qualified expenses. But expenses reimbursed by your employer are not allowed:
- Travel costs include transportation expenses and temporary lodging during the move. Your meals aren’t a qualified expense, but you may be able to claim a rented vehicle. You’ll need hotel bills, gas receipts, and toll receipts to apply for the deduction.
- Packing and shipping expenses include moving companies, storage facilities, and packing supplies. Expenses for crating and transporting household goods are also a qualified expense. This includes the cost of insurance and family pet transportation.
- Utility fees are charges for disconnecting or connecting utilities. You can claim these fees, but late fees and deposits that will be reimbursed aren’t eligible.
Get Tax Advice
Learn more about moving deductions by speaking with a tax professional. That’s the best way to make sure you take the correct deductions. Making false claims on your tax returns can result in criminal or civil penalties. So before claiming any moving expenses, make sure you have the correct information.
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