Itemized Deductions for Moving Expenses
It's always a pleasant surprise when the Internal Revenue Service allows you to subtract some necessary expenses from your taxable income. Moving expenses qualify, and better yet, you don't have to itemize on your taxes to claim them. This is an above-the-line deduction on the first page of your Form 1040. Some very specific rules apply and the deduction isn't available to everyone.
Purpose of Move
If you move because you want a change of climate, you can't deduct your moving expenses. Relocating for personal reasons doesn't qualify. The move must be for work-related purposes, such as that you've changed jobs or relocated your business. If your employer transfers you to a new location or if you've gotten a job for the first time or after a significant layoff, this counts as well.
Moving across town won't qualify you to claim your expenses. The IRS imposes a mileage rule. Your new work location must be at least 50 miles farther away than your old one was. This doesn't mean that your new job is 50 miles or more from your old home. It means that unless you move, you must commute 50 miles more to get there. For example, if you drove 20 miles from your previous home to get to your old job, your new job must be 70 miles away that location, necessitating the move. If you've never worked before, you're exempt from this rule to some extent, but your work location must still be more than 50 miles away from your home. You can't get creative and take back roads to extend your mileage. The IRS counts the distance as the shortest possible route between Points A and B.
Term of Employment
You must legitimately acquire employment after you reach your new location. The IRS doesn't allow you to take the deduction unless you accumulate at least 39 weeks' of full-time work in the year following your move. If you're disabled after the move so it's physically impossible to work, or if you lose the job after your move, you're exempt from this rule. You're also in the clear if your employer relocates you to yet another location in the first year after your move. The IRS has no official definition of what constitutes full-time employment, and the 39 weeks don't have to be consecutive. This rule applies to self-employed taxpayers as well, but you have an additional hurdle to clear: you must also work 78 full-time weeks at your business in the two years following the move. You can claim the deduction the year you move, but if you don't meet the employment requirements, you'll have to add the deduction back to your income in the subsequent year's tax return.
If you qualify to deduct your moving expenses, you can calculate them on Form 3903, then enter the total on line 26 of your 1040. Deductible expenses include moving your personal possessions and furniture, storage costs for 30 days, and disconnecting then reconnecting utilities. You can also deduct mileage if you drive to your new home at the rate of 23 cents a mile as of 2012. If you fly or take another sort of transportation to your new location, you can deduct fares for yourself and your family members. Unfortunately, you can't deduct the cost of your meals while you're traveling, and if your new employer reimburses you for the move, you can only claim the deduction if the reimbursement appears on your W-2 as income.
Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance and w, bankruptcy, and she writes as the tax expert for The Balance.