Tax season is in full swing like a square dance. While you’re gathering up documents and receipts don’t forget the ones related to your recent move. There’s a chance your moving expenses are tax deductible.
Which Moving Expenses Are Tax Deductible?
Most, but not all, expenses related to a move can be deducted from your taxes.
- Cost of lodging while traveling to the new location
- Cost of moving services
- Cost of rental trucks
- Cost of moving boxes and packaging
- Storage costs
- Mileage for using your vehicle to move – for 2012, 23 cents per mile can be deducted
You won’t have to list each item individually, but you will need proof of how much was paid in case you get audited.
What Qualifications Do You Have to Meet to Deduct Moving Expenses?
Only those that moved for work purposes are able to deduct moving expenses from their taxes. This applies to both employees and people that are self-employed. However, there are a few more criteria you have to meet.
- You must be a U.S. citizen or resident alien.
- You must pass the “Distance Test” – Your new workplace has to be at least 50 miles further than the distance between your old home and old workplace. For example, if your previous workplace was 8 miles from your old home the new workplace would need to be at least 58 miles from your old home to pass the Distance Test. If you worked from home or didn’t have a previous workplace, the new workplace must be at least 50 miles from your old home.
- You must pass the “Time Test” – Employees must work full time at the new workplace for a minimum of 39 weeks in the 12 months after the move. The self-employed must work full time for at least 39 weeks in the first 12 months and a total of 78 weeks within the 24 months after the move.
- If you haven’t yet met this requirement by the time your return is due but expect to do so, you can still deduct the moving expenses. However, if you don’t end up meeting the time requirement you’ll have to amend your tax return for the year you made the deductions or report the amount you deducted as income the following year.
There are exceptions for certain individuals. If you are a member of the Armed Forces that had to move because of a permanent change in station or military order you don’t have to meet the Distance Test and Time Test requirements. Additionally, you don’t have to pass the time test under other circumstances including disability, death and involuntary separation.
Where Do You Deduct Moving Expenses?
You can figure out your total moving expenses deduction using the IRS 3903 form. If you moved more than once in the tax year use a separate 3903 form for each move. Below are the steps you need to follow on the form:
Step #1 – Add the total expenses for storing and transporting your things as well as related travel expenses in lines 1 and 2.
Step #2 – Add lines 1 and 2 together for your total moving expenses.
Step #3 – Next input the amount that your employer paid or reimbursed you for in relation to the moving expenses on line 4.
Step #4 – Now subtract line 4 from line 3 to get your moving expense deduction. If line 4 is more than 3 then you don’t qualify for a deduction.
In addition to filling out the 3903 form you will also need to enter the moving expense deduction on line 26 of the 1040 form or line 26 of the 1040NR form.