Many people are required to move for a variety of different reasons. Particularly during these volatile financial times, there are a number of people relocating in order to find new jobs. What some may not know is that these moving expenses can be tax deductible on their federal tax return.
Follow the steps below to determine if your relocation expenses are deductible and possibly save some money at tax time next year:
First, you must examine your expenses and figure out whether or not they are deductible. Your reason for moving must have to have been job related. For example, you moved in order to start a new job or because the business you worked for relocated. In addition, you may also qualify if you moved a self-owned business to a new location. The new location must also fit criteria for a distance test and a time test. Your new job must be fifty miles further from your old home than your old job was from your old home. For example, John lived twenty miles from his job in his old home. John got a new job that was 100 miles from his old home. He decided to move to a new location 1 mile from his new job in order to shorten his commute. In this case John would qualify. Another example is Jane lived 20 miles from her old job. She got a new job that is 40 miles from her old home. She decided to move to a location 1 mile from her new job in order to shorten her commute. In this case, Jane would not qualify.
The second test your new job must pass is a time test. You must work full time for thirty nine weeks for the first year after you move to your new location. The only exception to this is in case of death, accident or non-voluntary separation (fired).
If you are an active member of the military and were required to move due to reassignment, you do not have to pass the time and distance tests.
Next, if you satisfy all criteria listed above, you are ready to deduct your expenses. Moving expenses are applied as an income adjustment. You must file form 1040, not 1040A or 1040EZ. You should use IRS Form 3903 to calculate your total moving expenses. Deductible moving expenses include transportation and storage of your goods, travel and lodging. Expenses for meals are not included.