The first couple of things that may cross your mind when it comes to relocating is the hassle of packing and moving expenses. Although full-service movers can make the task much easier, there are still moving costs you have to take into consideration. When you decide to make that move to a new location, Uncle Sam can help foot the bill of these moving costs in certain situations.
We know moving can be costly. Keeping receipts and cost details during the process may seem tedious, but it’s worth it. Here are the key factors in finding out whether you’re eligible for a tax deduction when moving.
A work-related move could range from changing your job or business location, or starting a new job or business. This makes you eligible for deductions on your moving expenses.
Working Full-Time vs. Part-Time
If you’re employed by a company or business owner, you need to prove that you’re and will be working full-time, for at least 39 weeks out of a 12-month period. If you’re self-employed, you can still qualify by proving that you will be working full-time for the same 39 weeks, per 12-month period as a permanent employee, but you must be able to prove that you will be working 78 weeks during the first 24 months, since your arrival at your new work location. Of course, there are certain exceptions to the time test rules, in cases such as sudden death, disability, an involuntary separation and a few other things that life can unexpectedly throw your way.
Factor in Your Commute
When it comes to tax deductions for moving expenses, your new workplace or the new location of your old workplace must be at least 50 miles farther from your home than it previously was. The same rule applies for those venturing on a new and exciting journey of entrepreneurship and self-employment. Your home must be at least 50 miles from your new place of business.
If You’re In the Armed Forces
Being in the Armed Forces isn't an easy feat. If you have to move due to a direct military order or because of a permanent change of station, you can totally ignore above-mentioned points. You don’t need to worry about them as they are not applicable to you.
So What Is A Moving Expense?
A moving expense isn’t just any cost that is related to your move. Here are a few claims you can make.
While on your way to your new location, claims you can make include transport fees, housing and lodging expenses for you and your family. When using your own personal vehicle, your transport fees include things like oil, parking fees and gasoline, as well as highway tolls. According to IRS rules and regulations, you’re allowed to calculate these costs by using the standard mileage rate. In the case of a long-distance move, the cost of train and airline tickets will also be covered.
Tax deductions for moving expenses include any costs you may incur due to having to rent a storage unit for up to 30 days. This is if you’re not able to move into your new house right away. One item that’s definitely not covered are your meals. Just remember to keep any and all expense receipts. No receipts mean every cent will be coming out of your own pocket.
Packaging & Shipping
Costs incurred by packing and crating the transportation of your property and household goods can all be deducted. Just keep those crucial receipts!
If you’re charged with any costs relating to the connecting or disconnecting of utilities, you can also deduct those as expenses.
What Can’t I Claim?
As great as it is that many items from your move can be claimed, this doesn’t include all costs. Any expenses relating to the sale of your house can’t be claimed. This includes your property taxes, mortgage and closing costs.
Another cost that can’t be deducted is costs incurred by renting a home. There are times when you may be in a situation where an old lease agreement has to be broken, or you may have to enter into a new lease agreement. Redecorating costs can’t be claimed either. This relates to your old or new home and includes any furniture, appliances or window dressings you may require.
Whether you’re doing a DIY move or hiring full-service movers, remember that any and all tax deductions for your moving expenses must be claimed within the year you move. If you’re still feeling a little bit uncertain regarding all tax-deductible moving expenses, it’s always a good idea to speak to a qualified tax pro in order to give you peace of mind.
All moving expenses must be reported and this requires some paperwork. Your tax professional should be able to provide you with these forms and assist you in completing them correctly. Otherwise, you can find all the info and forms you need on the IRS website, in Publication 521, Moving Expenses. Don’t forget to save those receipts!