The friendly people over at the IRS have made it possible for those who are required to move due to employment a tax-deductible event. But don’t get too excited yet because there are a few restrictions. The IRS has a two question test you must pass in order to qualify for this deduction:
- The 50 mile question. This means the distance from new employer’s location to your old home must be 50 miles or greater. So if you lived 10 miles from work and your new office is 45 miles from your old home, you are out of luck.
- Was the move due to employment? It requires that you are 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. This means you are allowed to switch jobs as often as you’d like after the move. And if your employer transfers you again or even lays you off, the IRS won’t hold it against you and will waive the 39-week test.
Once you qualify you need to be aware of what expenses can be deducted and which ones cannot. Generally speaking deductible expenses are those directly related to the move such as packing material, boxes, insurance that protects items during the move, the cost of traveling to your own home one-way and lodging costs with the exclusion of meals. If there are costs associated with disconnecting and reconnecting utilities from your old or new home these are also included, and could be a big one. The costs it does not cover are those directly related to the sale or purchase of your homes. This includes but is not limited to: closing costs, security deposits or if moving to a new state, vehicle registration or license costs.
I bring this topic up because we moved in January of 2006 and at the time I was completely unaware of the deductions available for moving due to a job. Because of this ignorance I had no intention to keep detailed records of the costs associated with the move, and therefore most will be hard to track down if at all. We moved nearly 200 miles thanks to my wife getting a new job and the costs associated with it were quite significant. Hopefully if you are expecting a move or did move in the past year you can use this information to keep good records of your costs so you can take full advantage unlike me.
For more detailed information and the form required: IRS Form 3903
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
Joyce, I don't know with certainty, but I believe that if you relocate for a job, whether you had a job before or not, you're eligible. Of course, it would be best to double check with a tax professional to make sure.
After a divorce, I had to get a job and found one but had to re-locate for it. Do I still qualify since I wasn't in a paid job before moving? I read the form and it really doesn't address it. I'm thinking yes. Anyone else?
dimes, it is on page 8 of pub 521 under moving within the US. It states:
"You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects."
Military can benefit from this too, and they don't have to meet the 50 mile and 39 week tests, provided they have an actual PCS move. HOWEVER, the military provides a dislocation allowance and moves a lot of your junk for you, which is why military personnel almost never file a form 3903.
Where do you see that utility connection is a deductible expense? I'm looking at Pub 521 and not seeing it anywhere at all.