How can you deduct moving expenses?
Moving guides - October 18, 2018
Moving can really be a big chore, right? And that’s not even mentioning how expensive it can get. Yeah, a relocation can really shake up your savings. But did you know it can also be a big tax break? Of course, that’s provided you know your way around taxes and you do everything right. We bet you have a lot of questions about moving and taxes. But don’t worry, though – we’ve got plenty of tips for you when it comes to how you can deduct moving expenses from your taxes.
Can you deduct moving expenses from your taxes?
So, first of all – yes, yes you can. But it’s not just that simple. There are rules that determine what kind of costs you can deduct, but don’t worry – we’ll go through all of them, step by step. And then we’ll also list some of the exceptions to these rules. It may seem complicated now, but trust us – by the end of this article, you’ll know full well if your relocation is tax deductible.
The job requirement
Okay, here’s the first and biggest hurdle to your effort to deduct moving expenses. Sadly, your relocation has to be related to your job. So yeah – moving to get away from noisy neighbors is an IRS no-no if you’re asking for tax deductions. In fact, federal tax guidelines are very clear on this. Your relocation has to be closely related to you starting to work in the area you’re moving to. And also, you can only deduct the expenses that you’ve had within 12 months. So, a year after starting to work in the new place. Yes, it’s a bummer – but that’s how it works.
If you thought that last part was the end of tricky requirements – you’ll have to manage your expectations by quite a bit. Because next up is the distance test. What the hell is that, you ask? Well, that’s another requirement you’ll need to fulfill if you want to deduct moving expenses from your taxes. We’ll try to put it as simply as possible, so pay attention.
Remember that new job that you need to have in your new area, in order to deduct moving expenses at all? Well, that workplace has to be farther away from your previous home than your old workplace. More specifically, it needs to be at least 50 miles farther – prepare to hire some long distance movers. So what does this mean in practice? Well, if your old job was 10 miles from your home – now you need a new one that’s 60 miles away from that old home if you want to attempt getting deductions related to moving.
Okay, besides your job and the distance, there’s also another requirement to meet before you can deduct moving expenses – and it’s measured in time. So, basically – there’s a certain period after a relocation during which you’ll have to work full time if you want to claim moving deductions. You have to work for minimally 39 weeks in the year after a relocation. Now, to clarify: these don’t need to be consecutive weeks, of course. And also, you don’t have to be working for the same firm the entire time. Although, you do need to work in the ‘same commuting area’, according to guidelines given by the IRS.
Now you may be wondering – but what if I’m self-employed? In that case, there’s an additional time requirement. Apart from those 39 weeks in the 12 months, you’ll also additionally need to meet the requirement of 78 weeks in the first two years. As you can see, these requirements overlap, and one does count towards the other. Also, you don’t necessarily need to be self-employed for the entire period. For example, you could work for someone else during the first year and then work towards the 78 week requirement during the second one.
Basically, the IRS doesn’t want people just buying moving supplies, driving somewhere and then moving back in a few days. People just driving around the country to deduct moving expenses is not really fair. And it’s only logical, really.
What are the actual expenses you can deduct?
Okay, so let’s talk about what specific moving expenses you can deduct. You’ll want to know this so that you specifically know which receipts to keep around. The biggest moving costs you can deduct are:
- Moving company – yes, the money you use to hire the movers is tax-deductible
- Driving expenses – specifically, you can deduct 19 cents per each mile you drive towards your new household
- Utilities – we’re talking about the costs of hooking up all of the utilities in your new home
- Pet transportation – if you’ve made any special arrangements to transport your pets, save those receipts as well
- Storage space – lastly, if you’ve had to rent out some storage space during the relocation, yes, that will count when you deduct moving expenses.
How to file for moving expenses deductions?
Right about now, some of you are probably wondering – but how do I actually make the claim to deduct moving expenses? Meaning, how to do it in practice? It’s not actually that hard. You do it by completing a form provided by the IRS.
Also, there’s another thing. You’ve probably realized this by now, but you can’t deduct moving expenses if you’re just taking the standard deduction. Instead, you need to opt for the itemized deduction. And yes, that means that you’ll need a lot more time to do your taxes properly, seeing as you’re filing for each deduction separately. But on the other hand, once you’re done, you’ll probably be left with a smaller tax bill. So which one is more worth to you – your time, or your money?