Ask the tax adviser
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?
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.
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
- 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
- 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
|Bankrate.com writers base their answers
on our editorial content and advice of financial professionals. We
make no claims or representations about the accuracy, timeliness or
completeness of such content, advice or the answers provided to you.
Our content, advice and answers are intended only to assist you with
your financial decisions. However, by its nature such information
is broad in scope. Your financial situation is unique, and our content,
advice and answers may not be appropriate for your situation. Accordingly,
we recommend that you get different opinions and seek the advice of
your accountant and other financial advisers before making any final
decisions or implementing any financial or investment strategy.