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Tax Talk with George Saenz

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Deductible moving costs

Dear Tax Talk:
I recently had to move more than 100 miles away for a new job. Can I deduct my costs of selling my old residence (commissions, closing costs, etc.) and my costs of purchasing a new home?
Tammy

Dear Tammy:
The cost of moving for a new job is expensive. Unfortunately, most of it is not deductible, including commissions and closing costs relating to the sale and purchase of a new residence.

It used to be that part of these expenses was deductible under the old tax rules, up to certain limits. But when Congress needed to raise revenues, it cut out most of the normal relocation expenses for job-related moves. Pretty much all you can deduct these days is the bill that the movers give you and the cost of transporting you and your family from the old town to the new one. Since you only moved 100 miles, the latter category won't add up to a lot. Moving expenses are deductible on IRS Form 3903.

I ran into an interesting article in a trade publication that discussed the burgeoning costs of IRS employee moves. The article points out IRS policy on employee moves, which is similar to those in private industry.

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Although both the government and private employers provide generous relocation packages, the items that are not tax-deductible result in the employee realizing additional income. Both government and private employers provide the relocated employee a tax reimbursement for recognizing this additional income, which makes the cost of the moves almost doubly expensive. The IRS provides its employees these move-related benefits:

  • A house-hunting trip of up to 10 days for the employee and spouse;
  • Travel expenses, including meals and transportation to the new job site;
  • Temporary meals, lodging and laundry at the new job site (temporary is defined as up to 120 consecutive days);
  • The payment of real estate expenses. This includes the cost of selling the employee's current home or getting out of a lease and help in purchasing a new residence, including mortgage assistance. The expenses are allowable up to 10 percent of the sale price of the old residence or $30,000 and up to 5 percent of the purchase price of the new residence or $15,000, whichever is smaller, or payment of an unexpired lease when all conditions are met;
  • Transportation of up to 18,000 pounds of household goods and temporary storage for up to 90 days. Extended storage of household goods may be available, and transportation of a mobile home or boat used as a primary residence in lieu of the transportation of household goods is available;
  • The cost of shipping a privately owned vehicle;
  • Miscellaneous expenses of discontinuing an old residence and establishing a new one. Those include the expenses of automobile licenses and registration, cutting and fitting carpets and curtains, connecting appliances and utilities and nonrefundable utilities deposits. Those expenses are limited to $700 for a single employee and $1,000 for an employee with a family; and
  • Reimbursement of extra federal and state taxes that may be owed on moving expense reimbursements.

The article points out that the average cost of an IRS employee move in 2001 was $63,108. Since most of the items in the above list are income to the employee, it could be that half the cost is the federal and state taxes due on the reimbursements.

-- Posted: Jan. 29, 2003

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See Also
Writing off moving expenses
Tax law changes should help some homeowners
Job hunting costs could cut tax bill
Tax glossary
More tax adviser stories
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