Moving Expense Tax Guide
According to the bureau of labor statistics, 9.6% of the American workforce is still out of work. Impressed? Well you should be because that number was 10.6% as recently as January of this year. That means the job market is improving. It also means workers are moving all over the place to get jobs. The point? The costs you incurred to move from one job to another are tax deductible.
To figure out your deduction you'll need Form 3903 entitled Moving Expenses. New for this year is a drop in the standard mileage rate (19 cents) for distances traveled between one home and another. As always, moving expense deductions include: the costs of lodging (not meals), the moving truck, a moving company, or anything else deemed reasonable. The IRS does not consider trying to deduct a weeklong excursion at the Grand Canyon when traveling from New York to Fresno reasonable.
There are two types of tests you must pass before you can deduct moving expenses. The distance test states that your new place of employment must be at least 50 miles farther from your old dwelling. Basically, if you used to be 8 miles from work, your new home has to be 58 miles from that very spot. If you weren't working, your new employer must be 50 miles from your old home. Obviously, the distance between the two points needs to be as short as possible. No detours when figuring mileage.
Testing Time
The time test states you have to be a full-time employee working (in the general area of you new workplace) for 39 weeks during the year after you move. So you can't move, claim the expenses, work for 6 months, get laid off, and collect unemployment. Well, you could but that would be illegal.
If you're self employed you need to meet the above criteria and a total of 78 weeks over the next 2 years. If you expect to meet the time test, you can claim your expenses in the year you move. For example, you move in January and claim the expenses when you file. But if something changes (and you have already filed but no longer meet the criteria) you will need to amend your return or count the deduction as income during the following year.
The time test does not apply if you lost your job because you became disabled. If you were transferred or laid off, this test doesn't apply. And lastly, if you are in the military and had to move because you're being deployed, the time test is moot.
Step by Step
As with anything tax related it is absolutely critical to keep good records. Just get a folder, label it moving expenses, and stuff anything (even remotely related) into it. You can sift through the data later, but for now, make sure you have the stuff.
Enter the costs of transportation and storage of household goods and your personal effects on Line 1. Line 2 is for travel, which includes lodging, (preferably a night or two at a four star hotel), from your old home to your new home. Line 3 wants you to add lines 1 and 2. If your employer paid for some of your expenses, you will have to account for it on line 4. This amount can generally be found in box 12 of your W-2 with code P.
If your employer paid you more for moving that it actually cost you, you will not be able to deduct any expenses. So if Line 3 is less than Line 4, simply subtract it and include it on Line 7 of your 1040 or Line 8 of your 1040NR. But if Line 3 is more than Line 4 you can claim your moving expenses. Just enter the total on Line 5 of this form, Line 26 of your 1040 or Line 26 of your 1040NR.
Fin
With employers loosening up, people are beginning to find work. Clearly, Form 3903 should save taxpayers millions (if not billions) in the upcoming tax year. So if you've moved for work, keep good records; spend the 3 minutes it takes to fill out this form, and claim what's rightfully yours.
