The Moving Expense Deduction
As you are lugging boxes to and from your old house, you may not realize that some of the expenses of moving may be deductible on your tax return. To ensure the biggest tax refund, you should take as many deductions as possible.
Unfortunately, the moving expense deduction does not apply to all moves. However, if you are moving due to a change in employment or a change in employment location, you may be able to recoup some of the costs associated with the move. To qualify for this deduction, your move must be closely related to the start of work, you must meet the distance test, and you must meet the time test.
Closely Related to Start of Work
For the move to meet this requirement, it must be closely related to the start of your new employment in relation to time and location. The time criteria may be met if the move occurs within one year of starting your new job. You do not have to pre-arrange employment as long as you get a new job within one year of moving. The location requirement may be met if your new house is closer to your new employment than your old house, you are required to live at a particular location as a condition of employment, or you will spend less time or money commuting from your new home than your old home.
When you consider these requirements, it is easy to see how many relocation circumstances will qualify for the moving expense deduction.
The distance test states that your new job must be at least 50 miles more from your former home than your old job was from your former home. So, if your old house was 10 miles from your old job, to meet the requirement, your new job must be 60 miles from your former home. The reasoning for this is fairly simple; you can not move 3 miles down the street and claim the deduction saying the move was closer to work and therefore necessary.
There are two variations of the time test: one for employees and one for the self-employed individuals.
As an employee, you must work full-time for at least 39 weeks of the first 12 months at your new location. However, you do not have to work at the same place for all 39 weeks or work 39 consecutive weeks.
Self-employed individuals must work 39 weeks of the first 12 months and for a total of 78 weeks during the first 24 month period at the new location. Like the employee standard, you do not have to work in the same general field; you simply have to work within the commuting area.
You are not required to meet the time test for 2005 by the time you file your return; you may claim the deduction if you expect to meet the requirement in 2006. If you do not claim the deduction because you do not meet the time requirement and later do so, you may amend your return.
Deductible Moving Expenses
Moving expenses you may claim in the deduction include the actual cost of moving your personal effects and the expense of traveling, as long as they are reasonable expenses. The cost of moving your personal effects may include packing supplies and transporting those items.