Growing Without Rain

Part 1 – can expenses be deducted
Part 2 – what expenses can be deducted
Part 3 – handling employer reimbursement

Now we come to the last step – how do you report moving expenses on your return?

For your Federal return, that’s the easy part. You record your moving expenses and employer reimbursements on IRS Form 3903. You report the total amount you paid to move your personal effects and household goods on line 1, and your deductable travel expenses on line 2. Line 3 is the sum of lines 1 and 2. On line 4, put the amount of your employer reimbursement (reported in box 12 with Code “P”). Subtract line 4 from line 3, put the result on line 5 and (if positive) transfer the total to line 26 of Form 1040. That’s it! Note that if the result is negative, you must report the excess reimbursement as part of your wages on line 7 of your form 1040.

What about state returns? Rules vary from state to state. Some states, like New Jersey, don’t allow them to be deducted at all (although in NJ you can exclude taxable reimbursements for moving expenses from your income). Some states, like Pennsylvania, allow them to be deducted only for moves into or within the state, but not for moves outside the state. Some states, like North Carolina which bases its tax structure off the Federal taxable income, allow them to be deducted regardless of the nature of the move. The general rule, if you are not sure, is that moving expenses go on the return of the state that you are moving to – but check with a tax professional first!