Every year, millions of Americans relocate to another city or state. In fact, the United States Census Bureau reported that 1 in 9 people changed residences in 2014. That equates to more than 9 percent of the U.S. population relocating due to a new job or a job transfer.
If you are one of those people who did make a move for your job, you may qualify for a moving expense tax deduction.
Deductible Moving Expense Requirements
Federal tax laws allow an individual to deduct their moving expenses if their relocation relates to the start of a new job or a transfer to a new location for an employer.
To qualify for the deductible moving expense, you must meet all three of the following requirements:
1.) First, your move must be closely related to work. This means both the time and place of your move must be within the allotted time and distance from your new job. So, if you incur moving expenses within one year of the date you first reported to work at a new job location, you would generally meet this requirement. This seems pretty cut and dry. However, there are some additional rules that may apply for you to pass this requirement. If you are interested, you can check them out here. Otherwise, if you passed this requirement with flying colors, move on to requirement number two.
2.) Secondly, your move will need to pass the Distance Test. The Distance Test requires your new job location to be at least 50 miles farther from your old home than your old job location was from your old home. If this is a bit confusing, no problem. Let’s do the math together.
Let’s say that your old workplace was 7 miles from your former house. In order to pass the Distance Test, your new job location will need to be at least 57 miles from that former home. If you passed the Distance Test, you can move on to requirement number three.
3.) The third and final requirement you must pass is the Time Test. The IRS states that:
“If you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. 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 immediately following your arrival in the general area of your new work location.”
With the Time Test, there are some exceptions like death, disability and involuntary separation. Another exception is if you have passed the previous two requirements and expect to meet the Time Test requirement after your income tax return is due, you may be able to still deduct your moving expenses. If you find yourself in this particular situation and have questions, please contact your personal tax preparation consultant.
When reporting your moving expenses, it is important to know that meals are not considered moving expenses by the IRS. Also, if your employer paid for your moving expenses or provided you with an allowance that was not included in your income, you may not deduct these expenses on your tax return either.
Get Help with Your Tax Preparation
Calculating your moving expenses for a tax deduction can be stressful when you do it yourself. If you just recently moved to Plano, Dallas, Richardson or Frisco, and need help with your tax preparation, contact our expert tax consultants at Plano Tax Prep today.