People move for various reasons: to be close to loved ones, amenities and nightlife, to pursue lower living costs, or just because you always wanted to live in a certain place. Proximity to work is the most common reason for moving, and you may be eligible for tax incentives if you just got that offer for a dream job hundreds of miles away. Or, if moving to the city of your dreams is the only viable place where you can start a business, chances are that you can deduct your moving expenses.
Contrary to popular belief, you don’t actually need to have a job lined up in order to deduct your moving expenses. So long as you find a job (or commence self-employment) within one year of your move in the area that you moved to, you will be able to deduct your moving expenses. So long as you work full-time for at least 39 weeks of the year following your move, you should be able to the take deduction. Most people have a job lined up prior to moving since it’s an expensive and stressful process, but if you are trying to leave an economically depressed area this is information worth knowing.
The self-employed are held to a higher standard for the time test in that they must work full-time in the area they moved to as either an employee or contractor for at least 78 weeks out of the two years following the move.
Assuming you meet the above timing requirement, you also need to meet the distance test. A common misconception about the distance test is that you have to move at least 50 miles away regardless of where you currently work.Your new main work location has to be at least 50 miles from your old primary residence than your old job location was from that residence. So if the new city you plan to work in is 80 miles from where you currently live, and you currently commute 20 miles to the job you have now, that difference is 60 miles and it meets the distance test. If that city was just 50 miles away, the difference would be only 30 miles and therefore not deductible.
Members of the armed forces who move because of permanent station changes do not have to meet the distance test.
Deductible Moving Expenses
Generally, traveling to your new home and any reasonable expenses incurred in moving your possessions (including pets) are deductible. Only direct routes are deductible so if you make a sightseeing trip stopping for additional days in the process, those expenses are not deductible. Other expenses include:
- Direct travel (bus, train, airfare)
- Actual cost of gas and oil or $0.23/mile for moving by car
- Lodging from the day that you couldn’t live in your old home anymore because you moved your furniture or turned in the keys
- Movers and packing/shipping your household items
- Moving your personal items to and from storage facilities
- Transportation of furniture, vehicles, and pets
- Connecting and disconnecting utilities
Keeping good records of moving expenses is necessary if you are looking to take the deduction at year end.
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