Tax-Deductible Moving Expenses

The expenses that one incurs while moving to a new place due to work related assignments or a new job may be tax-deductible. There are certain terms and conditions one must fulfill to claim a tax deduction on these expenses. The Internal Revenue Service has laid down certain requirements for tax-deductible moving expenses. These deductions are only allowed in case you are moving because of a job, it does not matter whether it is a new job or your current organization has transferred you to a new place. Normally, if your current organization transfers you to another city, they will be taking care of the reimbursements. But even then, you can deduct the moving expenses that exceed the reimbursements from your employer. To qualify for tax deduction, you must pass two tests. One is known as the 'distance test', while the other is known as the 'time test'.

Distance Test

You must satisfy some terms and conditions to get a tax exemption on moving expenses. The commute from your home/residence to your new job should be at least 50 miles more than your commute from your old home to your old job. Bit confusing? Let us take an example to illustrate this. Suppose, if you used to travel 10 miles from your old home to your office, then your new office should be at least 60 miles away from your old home/residence.

Time Test

In the first 52 weeks, (one year) you must work full-time for at least 39 weeks. In case you are self-employed, the requirements for the first year are the same, i.e 39 weeks, but you must work for a total of 78 weeks in the first 104 weeks (two years). Some points to remember are that full-time necessarily does not mean working 40 hours a week, in some companies it can be 35 hours a week or lesser. Also, IRS does not demand that you have to stick to one company to complete your 39 weeks. You can change as many companies as you like, the only thing that you need to make sure is that at the end of the year, you should have worked 39 weeks.

Qualified Moving Expenses

• Travel costs of yourself and your family members from your old location to your new location.
• The cost of packing and moving household goods to the new location.
• In case you used your own vehicle for relocation, the deductible mileage rate for 2011 is 51 cents/mile. You can also deduct tolls, parking costs, etc., but meals are non-deductible. Guess why? Because if you were not moving to the new location, you would have still had your dinner! These deductions on taxes focus only on those expenses which are directly or indirectly related to your move.

If you want to get tax exemption on moving expenses, while filling your income tax return, you will have to put these expenses on the IRS Form 3903. The total expenses are to be reported on Form 1040 Line 26. You will have to keep proofs of these expenses like receipts, bills etc., so that you can successfully claim tax deductions.

A Few Exceptions

• In case of a married couple, only one spouse needs to meet the time and distance requirements.
• You are working in the armed forces and you have been transferred due to a permanent change of station.
• Your transfer to the new location is for your employer's benefit.
• One's job at the new location ends because of disability, death, layoff other than misconduct.
• You are the surviving family member of a person who dies while working outside United States and you move in within six months of that person's death.

The tax laws are modified very frequently, so make sure that you are aware about any changes being made for better tax planning. The tax-deductible moving expense laws are being laid out so that some of your burden is lessened and you don't think twice before venturing out for new career opportunities. I hope this article is useful for you if you are thinking of shifting to a new city in search of a job or have been transferred by your current company.