One benefit to help take the sting out of the cost of moving is this: the Internal Revenue Service (IRS) allows tax deductions for certain moving expenses if you meet specific criteria.
First, if you’re moving as part of a job relocation and your employer is covering all of the costs, there won’t be much—if anything—for you to deduct.
But if you’re moving on your own to take a new job, you’ll want to make sure to keep track of the costs the IRS allows as tax deductions.
Do you qualify for tax deductions?
The IRS only allows moving tax deductions for job-related reasons. It can be a new job, a transfer, or even a first job. However, you can’t move and expect to deduct the expenses just because you like the weather better someplace else.
To make sure you have moved because of a job, the IRS requires you to be employed full-time for 39 weeks (about 10 months) of the first 12 months of your move and in the general area of your new job location. The 39 weeks does not have to be spent at the same job—just at a full-time job in the same area.
The second criterion is the 50-mile rule. Some folks think they qualify if their new home is 50 miles or more from their old one—or if their new job location is 50 miles or farther from their old job location.
Neither is correct. The IRS states, “Your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home.”
For example, if you lived 10 miles from your old job location, the new job location would have to be 60 miles from your previous residence. Anything less? You can’t deduct moving expenses.
If you own your own business, you can relocate and take the moving deductions as long as you meet the 50 miles and 39 weeks criteria. If you’re self-employed, you will need to meet the 50 miles and a longer 78 weeks rule.
Those who are self-employed—whether at a business location or at home—must work full time in the new location for 78 weeks (about 20 months) of the first 24 months after moving.
For couples filing jointly, only one spouse needs to meet the criteria to qualify for moving-cost tax deductions.
What are deductible moving expenses?
Because the IRS has a short list of allowable deductions, it’s not hard to keep track of what’s allowed. Here’s an outline of what you can expect to take off your taxes:
- The cost of packing and transporting your household goods and personal effects—whether you do it yourself or hire professional movers—is fully deductible. This also includes the cost of insuring your belongings during the move.
- Any costs to connect and disconnect utilities because of the move.
- The cost of transporting your cars and pets to a new home.
- The cost of storing your belongings for no more than 30 consecutive days after the move is also deductible.
- You can deduct lodging expenses for one day at your old residence after your belongings have been moved.
- Only deductions for one trip for you and your household members are allowed.
- If you are traveling by car, you can deduct your actual expenses for gasoline, oil, lodging, parking fees and tolls. You can itemize your miles, but you can’t deduct expenses for meals and sightseeing—or for repairs, maintenance, insurance or depreciation on your car.
For more information and detailed explanations of moving deductions, visit the IRS web site to make sure you understand the rules.