The Internal Revenue Service (IRS) has very strict rules on who can claim moving expenses on their tax return. The following is a summary and simplified version of Publication 521 published by the IRS.
According to the IRS, you can deduct your moving expenses if you meet these three requirements:
- Your move is closely related to the start of work.
- You meet the distance test.
- You meet the time test.
Related to the Start of Work
Your move must be closely related, both in time and in place, to the start of work at your new job location.
Closely related in time means that the move occurred within one year from the date you started to work at the new location. It's not necessary that you arrange to work before moving to a new location, as long as you do go to work.
If you don't move within one year of the date you started work; normally you cannot deduct moving expenses unless there's a valid reason why you didn't move within the 12 months.
For example, if you were offered a job in Syracuse, yet your family stayed in Seattle so your daughter could finish high school, and you didn't move your family until 16 months after you started your new job, you can claim moving expenses. Closely related in place means if the distance from your new house to your new job is less than the distance from your old house to your old job. If this is not true, you may still be able to deduct your moving expenses if living in your new home is a condition of your new job or if you'll be spending less time or money commuting from your new home to your new job.
Home is defined as your primary residence and can be a house, apartment, condominium, houseboat, house trailer, or similar dwelling. It does not include other homes owned or kept up by you or members of your family, or a seasonal home, such as a summer cottage.
Your move will meet the distance test if your new job location is at least 50 miles farther from your old home than your old job location was from your old home.
For example, if your old job location was 3 miles from your old home, your new job location must be at least 53 miles from your old home.
Please note that when you're calculating distances, make sure you use the shortest route.
- Enter the number of miles from your old home to your new job location.
- Enter the number of miles from your old home to your old job location.
- Subtract #2 from #1.
Is your answer at least 50? If the answer is yes, you meet this test; if the answer is no, you cannot deduct your moving expenses.
Here's an example from Publication 521:
You moved to a new home less than 50 miles from your former home because you changed main job locations. Your old main job location was 3 miles from your former home. Your new main job location is 60 miles from that home. Because your new main job location is 57 miles farther from your former home than the distance from your former home to your old main job location, you meet the distance test.
Main job location is defined as the place where you spend most of your working time.
Time Test for Employees
To deduct your moving expenses, you also must meet either the time test for employees or the time test for self-employed persons.
If you are an employee, you must work full-time for at least 39 weeks during the first 12 months after you arrive in the new location.
It is called the 39-week test. These four rules apply:
- Count only your full-time work as an employee, not any work you do as a self-employed person.
- You do not have to work for the same employer for all 39 weeks.
- You do not have to work 39 weeks in a row.
- You must work full-time within the same general commuting area for all 39 weeks.
Time Test for Self-Employed Persons
If you are self-employed, you must work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive in the general area of your new job location. It is called the 78-week test. These three rules apply:
- Count any full-time work you do either as an employee or as a self-employed person.
- You do not have to work for the same employer or be self-employed in the same trade or business for the 78 weeks.
- You must work within the same general commuting area for all 78 weeks.
My advice: if you're still uncertain if you qualify, make sure you keep all your receipts, then see a good tax accountant. They'll help you determine if you can deduct your moving expenses. Also, check out the IRS website for more detailed information.