I have had this come up several times recently. It seems as though many people overlook the moving expense deduction. Taxpayers are entitled to deduct moving expenses provided they meet two tests: Distance Test and Period of Employment Test. If both of these tests are met a taxpayer is entitled to deduct moving expenses on their individual tax return regardless of whether or not they itemize. The deduction is an adjustment on page 1 of their tax return.
The distance test is the first test that needs to be met. The distance from your old residence to your new job location must be at least 50 miles more than the distance from your old residence to your old job location. But the distance from your new residence to the new job can’t be greater than the distance from your old residence to the new job, unless you are either required to live in the new location or your time or cost of commuting are being reduced. The next test is the Period of Employment Test. To qualify under this test, you must either:
- 1Work full-time as an employer for 39 weeks during the 12 month period after arriving at the new location, or
- Work full-time as an employee or perform services full-time as a self-employed individual for 78 weeks during the 24 month period after arrival at the new location, of which not less than 39 weeks are during the first 12 month period.
An employee only needs to meet the 39 week test. If you are self employed you must meet both the 78 week and 39 week time frames in #2 above. If you are a self employed person and an employee during the time frame you can meet the 78 week with the combination.
The question that then gets asked, well do I have to wait until the time frame of the Period of Employment test to deduct moving expenses? The answer is no. The taxpayer can deduct the moving expenses in the year that the expenses are incurred. If, for some reason, they end up not meeting the Period of Employment test, they must then pick up the moving expense as income or amend the tax return they filed with the moving expenses. The next question is what moving expenses can I deduct? You can deduct the following expenses: Cost of packing, crating, transporting, storing and insuring, connecting and disconnecting utilities, travel, and lodging. When using your vehicle for travel you can either deduct the cost of gas & oil, or a standard mileage rate set for the year plus parking fees and tolls. There is no dollar limit on the amount of the expenses that can be deductible, but you can only deduct reasonable costs. One must also look at whether or not their employer reimburses them and whether that reimbursement is taxable or not taxable.
If you have any further questions in regards to the moving expense deduction, don’t hesitate to give us a call at 770-856-1309.