Buckle your seat belts…Figuring out your allowable moving expense write-offs could be a bumpy ride!
By: Phillip E. Goldstein, managing partner Goldstein Lieberman & Company Certified Public Accountants and Business Advisors
Allowable moving expense write-offs are “above-the-line” deductions. That means you don’t have to itemize these costs on your tax return to benefit. But before you breathe a sigh of relief, consider the requirements you must first meet to be eligible.
First of all, make sure your move is work-related. Otherwise, this is a no-go journey.
Still onboard? Here’s the first mile-marker. You must pass the 50-mile test. This means the distance between your new primary job and your former home must be at least 50 miles greater than the distance you spent on your former commute.
Still with me? The second mile marker is the 39-week requirement. It says you must be employed full time in the general area of your new job location for at least 39 weeks during the 12 months after you make the move. You can switch jobs as often as you like during the specified 12-month period as long as all the jobs are in the same general area.
The rules are slightly different for business owners. Let’s say you’re a sole proprietor, partner or member of a limited liability company. You can simply transfer yourself and claim a moving expense deduction but you still must pass the 50-mile and 39-week tests, And there’s a third marker that applies to self-employed people–you work full time in the new area for at least 78 weeks during the 24 months after you move.
If you’ve been out of the workforce, or have worked only part-time for a “substantial” period, you can claim a moving expense deduction when entering or rejoining the full-time workforce. (The IRS doesn’t clearly define “substantial.”) To qualify, your new job and your former residence must be at least 50 miles apart. In addition, you must pass the aforementioned 39-week test.
For a married joint-filing couple, only one spouse must pass the applicable markers or tests to qualify for a moving expense deduction on the couple’s joint return.
The moving expense deduction can be significant. You can deduct the cost of packing and shipping your possessions — including insurance and up to 30 days of storage. You may also write off the cost of traveling once to your new home, which includes lodging but not meals. If you drive, you can deduct actual driving costs (such as gas and oil) or a standard cents-per-mile amount. What’s more, you can write off the cost of disconnecting utilities at your old home and hooking up the ones at the new home.
Of course, there are restrictions. And, sadly, the list of what’s not allowed is much longer than what is.
I also want to mention that if you get reimbursed for some or all of your moving expenses, you’re not allowed to deduct costs paid by your employer. There are two ways for an employer to pay moving costs: By granting tax-free reimbursements for expenses that employees could have deducted if they’d paid the costs themselves, or by adding reimbursements directly to employees’ taxable salaries.
Unless you’re an expert, you may need a tax adviser to be your guide on this moving excursion. Bon Voyage!