According to the IRS, if you moved due to a change in your job or business location, or because you started a new job or business, some of your moving expenses can be deducted on your annual income tax returns. However, you will need to accomplish and attach Form 3904 Moving Expenses to your Tax Form 1040 to be able to claim this tax deduction. After all, not all types of moves will qualify. There are three main criteria that must be met before you can deduct your moving expenses. These are:
- Your move must coincide with a change in work location and be closely related to the start of work. The change in work location can be due to a transfer within your current company or a job at a new company.
- Your move has to meet the IRS’ distance test, which states that “Your new job location must be at least 50 miles farther from your old home than your previous job location.”
- You need to meet the IRS’ time test, which states that “After the move, you must work full-time at your new job for at least 39 weeks the first year.”
Given the 39 weeks, or 12-month period, set in the IRS’ time test, most taxpayers won’t know for sure whether or not they did passed that test until the following tax year. However, the IRS allows you to claim the deduction in the year you move. In the event however that you find out that you do not satisfy all requirements at the conclusion of the 12-month period, you must reverse the deduction. You will either include the original deduction amount in “other income” on your next tax return or file an amended return to modify the original without the moving expense deduction.
So what moving expenses are tax deductible? The costs of packing and transporting your household goods and personal effects, whether you do it yourself using your own vehicle or a rental truck from say Budget or U-Haul, or you hire professional movers, are of course all fully deductible so long as you meet the three IRS criteria. Other deductible expenses include 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 your new home, among others. You can even include the cost of renting a storage unit for up to 30 days if you are unable to move into your new home immediately after leaving your former home. If you use your own car to take yourself, members of your household, or your personal effects to your new home, you can deduct either your actual expenses, such as the amount you pay for gas and oil for your car so long as you keep an accurate record of each expense, or the standard mileage rate of 23 cents per mile.