Moving from one place to another involves more than just packing and unpacking. You have to arrange to have your mail forwarded, get new tags for your vehicle, register to vote and get your utilities connected. It can get expensive. For example, your new utility company might charge a fee to hook up your service. Whether your utility connection fees are tax-deductible depends on whether you use the utilities for business or personal purposes.
Your home is probably your largest single purchase and your biggest single investment. It might also provide you with your biggest tax deduction. As of the 2012 tax year you can write off the mortgage interest on both your main home and a second home. You can also deduct your real estate taxes. But there are lots of expenses associated with owning a home that are not tax-deductible. For example, you can't deduct your homeowner's insurance, landscaping, utilities or any connection fees to hook up your utilities.
If you move for your job, and the distance to your new job site is more than 50 miles farther from your old home than your old job site, you might qualify to write off your moving expenses. You can deduct the cost of transporting your household goods to the new location, the cost of storing your household goods while you are waiting to move, and traveling costs, including lodging, to get yourself and your family to your new home. But you can't deduct the purchase price of a new home, any settlement costs for buying a home, any security deposits for renting a home, or the connection fees and deposits for establishing utility services.
Employee Business Expenses
While utility connection fees are not deductible as a personal expense, a portion of those fees might be deductible as an employee business expense if you use your home for business purposes. For the utility connection fees to qualify as an employee business expense you must use part of your home regularly and exclusively as your principal place of business or where where you meet clients, customers or patients in the normal course of business. A separate structure from your home that you use for business can also qualify. You can deduct the percentage of your utility connection fees that correspond to the percentage of your home that you use for business purposes. The employee business expense deduction is included with your other miscellaneous expenses when you itemize your deductions. The total amount of your miscellaneous expenses is limited to the amount that exceeds 2 percent of your adjusted gross income.
The deduction for using your home for business can also be claimed if you are self-employed. The qualifications are the same, regardless of whether you are self-employed or work as an employee, but the deduction is different. If you claim the business-use-of-home deduction for self-employment, you must report the deduction on Schedule C. You don't have to meet the 2 percent floor, and you don't have to itemize your deductions.
- Internal Revenue Service: Publication 530, What You Can and Cannot Deduct
- Lawyers.com: Business Use of Your Home Tax Deduction
- Internal Revenue Service: Topic 509 - Business Use of Home
- Internal Revenue Service: Topic 508 - Miscellaneous Expenses
- Internal Revenue Service: Publication 521, Deductible Moving Expenses
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.