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Tips for claiming moving expenses
>Luis Ingles, CPA

If you move to a new home because you started a new job or changed your job location, you may be able to deduct your moving expenses. This is true whether you work for someone else or are self-employed.

For this great deduction, you must meet two tests: the distance test and the time test. Don't worry, we have the crib notes on what's needed to pass.

Distance test

Moving expense deductions are only available for job-related moves. Assume you lived in the city and decided to move to the suburbs. If this move wasn't related to a change in jobs or job locations, you can't deduct your moving expenses.

If you change jobs as well as residences, then your new job location must be at least 50 miles further from your old home than your old job location was. Let's say your old job was five miles from your old home. You take a new job that is 60 miles away -- and that's a heck of a commute. So, to cut down on the commute to your new office, you move to a new house that's closer to the new job.

What matters is that, in this example, your old job was 5 miles away, and the new job is 55 more miles away. Bingo! You get to deduct your moving expenses.

Time test

If you aced the distance test, you must determine if you can satisfy the time test. Conditions for meeting this test differ for employees and self-employed individuals. If you are an employee, you must work as a full-time employee in the general area of your new job location for at least 39 weeks of the first 12 months you are in this new location. If you are self-employed, you must work full-time in the general area of your new job location for at least 39 weeks during the first 12 months and for at least 78 weeks during the first 24 months you are in this new location.

Many taxpayers haven't met this test by the deadline for filing their tax return. How can they possibly deduct their moving expenses? For example, if you moved at the end of 1999, it is impossible to meet the time test until at least 39 weeks into 2000. Your tax return is due before the 39-week period ends. The good news is that you can still deduct the expenses on your 1999 return as long as you truly expect to meet the 39-week test or, if self-employed, the 78-week test.

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If you later realize that you didn't meet the test, you must either amend your 1999 return to delete the expenses or include the amounts previously deducted in error as other income on a subsequent year's return. On the other hand, if you didn't deduct the expenses thinking that you wouldn't meet the time test but later on you meet the test, you can amend the original return to deduct the expenses.

Qualifying expenses

Let's assume you meet the two basic tests. Now it's time for the most important question: What can you write off?

You can deduct the reasonable expenses of moving your household goods and personal effects and traveling to your new home. There are several unique expenses that are deductible:

  • The cost of storing and insuring household goods and personal effects for any 30-day period after they are moved from the old home and before they are moved to the new home.

  • Any costs of connecting or disconnecting utilities required since you are moving household goods, appliances or personal effects.

  • The cost of shipping your car and household pets to your new home.

  • The cost of moving household goods and personal effects from a place other than your former home (perhaps, your parents' home).

  • Lodging expenses in the area of your former home within one day of leaving the former home.

  • Travel and lodging expenses in the area of your new home on the day you arrive.

If you drive your car to your new home, you can deduct car expenses in one of two ways: either the actual expenses such as gas, oil, parking, or tolls if you kept track, or the mileage method assessment of 10 cents a mile.

Unfortunately, some major expenses don't qualify for the deduction:

  • House-hunting expenses prior to the move

  • Temporary living expenses once you arrive

  • Meals

  • Expenses of buying or selling a home

Can't claim what you don't pay

Generally, if your employer reimburses your actual moving expenses, the reimbursement isn't included in your taxable wages. Since the reimbursement isn't taxable, the expenses aren't deductible. However, taxable wages always include any reimbursement of non-deductible moving expenses such as house-hunting expenses or meals.

If the employer's reimbursements exceed the actual moving expenses, the excess is included in taxable wages. Similarly, if the expenses exceed the reimbursement, the excess expenses are deductible.

Compute the deductible expenses on Form 3903, Moving Expenses. Next, enter them on page one of your income tax return. The deduction is an "above-the-line" write-off. In other words, it reduces adjusted gross income. Unlike deductions such as home mortgage interest and charitable contributions, you can take this moving deduction whether you itemize or not.

-- Posted: March 22, 2000

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