Moving Expenses May Be Tax Deductible By Caryn M. Feldman, CPA, MST

Understanding the tax rules for job-related moves can be as exhausting as moving itself. For example, first, you will need to separate personal, nonmoving expenditures from deductible moving expenses. Then, you will also need to figure out what portion of any employer reimbursement of moving expenses is taxable. There have been major changes in the moving expense tax rules in recent years. If you’ve moved before, some of these requirements will be familiar to you, but this article is aimed at highlighting some of the often-missed rules.

There are only two categories of moving expenses that are deductible; transporting expenses and traveling expenses.

House-hunting expenses, temporary living expenses and certain real estate expenses are no longer deductible. However, more people will find that they may benefit from the deduction because it’s available even to those who do not itemize deductions. Also, the deduction is no longer subject to dollar limitations.

Time and Distance Tests

Generally, moving expenses are deductible only if closely-related both in time and place to the start of work at a new job location. “Closely-related in time” means that all expenses must be incurred within one year of first reporting to work at a new location. However, delayed moves can be acceptable due to reasonable circumstances. In addition, if the taxpayer is an employee, he or she must work full-time for at least 39 weeks during the first 12 months after arriving in the new general area. Self-employed taxpayers must not only work full-time for at least 39 weeks during the first 12 months, but they must also work full-time for at least 78 weeks during the first 24 months.

“Closely-related in place” means two things. First, the distance from the new home to the new job location cannot be more than the distance from the old home to the new job location or moving is a condition of employment. Second, the new job location must be at least 50 miles farther from the former home than the old job was from the former home.

What expenses are deductible?

Not all moving expenses are deductible. Under the Internal Revenue Code, all reasonable expenses related to moving your household goods and personal effects will qualify. However, extra costs incurred for fitting windows for new curtains, for example, or hunting for a private school, will not. The IRS has provided guidance that qualified expenses will also include:

· The cost of storing and insuring household goods and personal effects only within any period of 30 consecutive days;

· The cost of moving possessions from another location (i.e. a summer home that is also being sold); and

· The cost of traveling from the old home to the new home by the most direct route.

Employer Reimbursements

Under the Internal Revenue Code, gross income does not include any qualified moving expense reimbursements.

Reimbursed expenses that are not otherwise deductible are included in the employee’s income. Employers often times gross up the amount of reimbursement to cover the employee’s additional income tax liability. Nevertheless, these amounts must still be reported in total on the employee’s tax return.

Moving expenses may be an important factor for married couples in deciding whether to file joint or separate tax returns. When a husband and wife move but only one of them begins work in the new location and a joint return is filed, the moving expenses paid by either spouse that are attributable to the move of the entire family can be deducted. However, married couples that make a job-related move and file separate returns, should note that only the working spouse may deduct the amount of moving expenses that he or she pays. The nonworking spouse is not entitled to a deduction for the moving expenses paid by him or her on a separately filed return.

Caryn M. Feldman, CPA, MST is a tax manager at Walter & Shuffain, P.C. located in Norwood, MA, a public accounting firm providing tax, audit and business consulting services to individuals and closely-held businesses. For more information on moving expenses, please call Caryn at 781-769-5300 or e-mail her at cfeldman@wscpa.com.