How to deduct moving expenses on your federal tax return

Did you move last year?

If so you might be able to deduct your expenses when you file taxes this year. It all depends on how far you moved, and how long you plan to work when you get there.

There is a few other nuts and bolts to wrap your head around before you start adding up receipts, so we turned to several tax experts for additional guidance.

Below is our guide for deducting moving expenses:


Who is eligible?

The first step in getting those tax deductions is to make sure you are eligible. Relocation deductions are aimed specifically at individuals who change their place of work, and there are two criteria that individuals have to meet before they can claim those deductions.

One is the “time test” and one is the “distance test”, said Michael Slack, a senior tax research analyst with the Tax Institute at H&R Block.

Qualifiers for the time test: An individual must work full-time in the new location for at least 39 weeks during the year following that move. For those individuals who are self-employed, the requirement is longer at 78 weeks over a 24-month period following a move.

Qualifiers for the distance test: The new place of work has to be 50 miles further from the former home. For example, if an individual lived 25 miles away from an employer in a previous home, then they add the 50 miles on top of that 25 to come up with a minimum of 75 miles.


What can I deduct?

There are two basic categories for deductions. One category relates to expenses relating to the moving of household goods and personal effects, and the second category relates to traveling from the former residence to the new residence, according to Daniel A. Greenhagen, tax manager at CliftonLarsonAllen LLP in Minneapolis.

Expenses related to the moving of household goods and personal effects would include the cost to pack, store, insure and transport them within a 30-day period surrounding a specific move-date. For example, the cost of purchasing packing boxes or hiring movers would be allowed as a deduction, but a cleaning service to prepare a former home for sale would not be allowed as a deduction, Slack said.

The cost of renting a self-storage unit is a deductible expense, but only during the transition period between residences. In addition, the amount than an individual could expense on storage costs would only be for a maximum 30-day period starting from the move-out date in the former home. After the 30 days, that expense is not deductible as a moving expense.


Travel expenses

The second category relates to travel expenses for the individual and any member of his or her household. For example, mileage, airfare, bus tickets and lodging expenses would be deductible for an individual and all members of the household.

“You and your family members can travel separately and in different manners but only one trip per person is allowed,” said Mark Steber, chief tax officer at Jackson Hewitt.

One important note here is that this deduction includes anyone in the individual’s household, such as an unmarried partner even if they file their taxes separately.

Travel expenses that are not deductible would include any travel costs incurred to go look at new homes prior to a move. Meals are not allowed as a deductible moving expense. The cost of breaking an existing rental lease on a former home also would not be deductible. In the case of temporary housing during a transition from one home to the next, only one night is deductible, Greenhagen said.

Individuals need to include a Form 3903, Moving Expenses, with their tax return to claim a deduction for their moving expenses.


What if my employer reimburses me?

Some employers provide either a relocation allowance or reimburse employees directly for moving expenses. The reimbursement of moving expenses by an employer can be received by the employee as a “tax-free” fringe benefit, said Greenhagen. To the extent an employee is reimbursed by his or her employer on a tax-free basis, the employee cannot also claim a deduction for moving expenses on his or her tax return.

However, if an employer provides the employee with additional dollars because of the move, but treats it as taxable wages to the employee, then the employee is allowed to deduct all moving expenses that he or she is paid.

For example, if an employee pays $8,000 for moving expenses and the employer pays the employee an additional $5,000 of taxable wages for the purpose of covering some of the cost of the move, the employee can deduct the full $8,000 of moving expenses on his or her tax return, Greenhagen said.


Save those receipts

As with all deductions, it is important to provide all of the receipts and documentation to get either the employer reimbursement or the tax deduction.

Slack recommends keeping a logbook that includes dates, mileage and costs as some of the deductions are date sensitive, such as within a 30-day period. Make a note of what the purpose of the trip or expense was.

For example, if an individual makes multiple trips to transport goods, record what was transported on each trip, Slack said.

“Make sure you keep track of everything related to your move. You may not be thinking about it, but you never know what might be deductible,” said Slack.

Categories Moving