Every little bit helps when it comes to paring down moving expenses. So it might be a happy surprise to learn that Uncle Sam offers a little relief at tax time, at least if the move is work-related.
The IRS doesn’t dole out tax breaks freely, so you’ll have to meet their criteria, which is published in their “Moving Expenses: Publication 521 (2015). If you do, moving might sting a whole lot less.
General Requirements for Earning a Tax Deduction
The basic criteria that qualify you for a tax break on moving expenses deal with the purpose of your move, how far you’ll travel and the time involved. To prequalify for a deduction, you must meet these restrictions:
- Your move is directly connected to the start of a new job
- You meet the IRS distance text
- You meet the IRS time test
Moving across town to start a new job probably won’t make the cut. But genuine relocation to another area might. Visit moverjunction.com to learn about professional movers and what to expect.
Meeting the IRS Tests
Starting a new job doesn’t automatically qualify you for a tax break. Starting a new job that requires you to relocate to a new area often does. The IRS looks at the time and the place of the new job as compared to your move to decide whether or not a deduction is allowable.
Moving a short distance doesn’t measure up to the IRS distance requirements. So in addition to moving for a job and making the move at the right time, you must also need to make that move. According to the IRS, 50 miles is the make-or-break line. Here’s how they calculate it: your new job must be 50 miles farther away from your old home than your previous job was. Pretty simple.
As for the time test, both employees and self-employed people can qualify as long as either is a full-time job. As an employee, you must work a minimum of 39 weeks out of the first year after you move to the new home. They don’t have to be consecutive weeks. If you’re self-employed, you must meet the same requirements, but for 78 weeks out of two years instead of 39 weeks out of one year.
What You Can Deduct
Publication 521 also explains what’s deductible and what’s not. In general, the guidelines are just a reasonable way of considering moving expenses. If it’s related to the move, it’s usually deductible. If it’s not related, such as the meals you eat along the way, it’s not deductible. Here’s what’s allowable:
- Travel by car (explicitly excluding air or rail travel or public transportation)
- Gas, oil, and other consumables used on the trip
- Driving and parking fees and tolls
- Lodging on the trip plus one extra day’s motel or hotel lodging after you arrive
- Packing, crating and hauling household goods
- Utility connect and disconnect fees
- Vehicle shipment
- Pet shipment / transportation
- Household goods storage and insurance for 30 days
- The same expenses for every person in the household. So if you drive two cars and get two rooms for lodging, both are deductible.
What Doesn’t Qualify
The IRS imposes reasonable restrictions on what you can deduct from your taxes. Don’t expect to get a tax break for a big meal at a steak house along the way. And entertainment along the way is all on your own dime, too. Here’s what Uncle Sam frowns on:
- Repeated trips to the new home. You can only deduct one trip.
- General vehicle repairs, maintenance or depreciation
- Lodging at your new location that exceeds one night.
- Shipping or purchase cost of furniture bought en-route to the new home.
- Household goods storage that exceeds 30 days
Tax breaks might not help with hiring a mover or buying packing supplies, but they can certainly come in handy later. And you know what they say: a penny saved is a penny earned.
In general, tax deductions are allowable for anything that’s reasonable. But also be aware that federal guidelines change. Before you make a move, be sure to check out the IRS website to learn whether there have been any updates. You might even find that more deductions are allowed than before.
When you’re ready to make a move, we can help connect you with a great moving company with solid, trustworthy credentials. That’s peace of mind. Contact us today and get a free moving quote.