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Deducting moving expenses, part 1 – do I qualify?

with 5 comments

Moving expenses are a commonly overlooked deduction, both at the Federal and state level. You can deduct your moving expenses on your Form 1040 if you meet all of the following tests.

Your move must be closely related in time to the start of work in the new location. Generally, this means that deductable moving expenses must be incurred within 1 year from the date that you start work in the new location. Exceptions are allowed if family reasons (e.g. allowing a child to graduate from his/her current school) prevent the move.

Your move must also be closely related in place to the start of work in the new location. Generally, this means that the distance from your new home to your new place of work does not exceed the distance from your old home to your new place of work. Exceptions are allowed if you are required to live at your new home as a condition of employment, or if you can show that you will spend less time or money commuting from the new home

You must meet the distance test. Your new main job location must be at least 50 miles further from your old home than your old job location was from your old home. If you live 5 miles from work, the new job location must be at least 55 miles from your old home

You must meet the time test. The time test has two variations, one for employees and one for self-employed people. Employees must work full-time in the new location for at least 39 weeks in the 12 months following arrival in the new location. Self-employed people must work full-time for 78 weeks in the 24 months following arrival in the new location, counting full-time work done either as an employee or as a self-employed person (this covers temp-to-perm, for example).

The time test does not apply if you:

    are in the military, and must move because of a permanent change of station;

    move to the United States from a job location outside of the United States because you retired;

    are transferred to another location for your employer’s benefit;

    are laid off for a reason other than personal misconduct; or

    have your job end because of disability or death

If you do not meet the time test for 2009, but expect to meet the time test in 2010 (for employees) or 2011 (for self-employed people), you may still deduct your moving expenses in your 2009 return. However, if you later fail to meet the time test, you will have to reclaim the deduction, either by amending your 2009 return, or by adding the deduction back in 2010 or 2011 as “other income” on line 21 of Form 1040.

In later posts, I’ll talk about what you can deduct and how you report the expenses, and discuss some of the state tax issues.

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Written by nctaxpro

February 15, 2010 at 5:12 pm

5 Responses

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  1. […] a comment » Now that you know whether you qualify to deduct moving expenses, you need to know what you can deduct. You can deduct (a) reasonable costs of moving your household […]

  2. […] how to determine if you qualify to deduct moving expenses, and […]

  3. Is it possible to deduct moving expenses because I got laid off from work so I had to sell my house and move across the country to live with family?

    Tammy

    April 15, 2010 at 8:06 pm

    • Tammy:

      Yes, it is possible to deduct your moving expenses, if you obtained a full-time position in the new location in time to meet the 39 week rule. IRS Publication 521 describes the rules for deducting moving expenses.

      nctaxpro

      April 16, 2010 at 7:29 am

  4. […] expenses. I wrote about this last year, so you can read Part 1, Part 2, Part 3, and Part 4 for […]


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