Can You Deduct Moving Expenses from Your Taxes?
February 2, 2019 by Marty Orefice | Financing
Moving is expensive as heck.
When you're moving into your rent-to-own home, you're paying the rent for your first month and the option fee all at once.
Then, you've gotta get all the stuff from where you currently live to your new place. At the very least, this task requires renting a large truck, but it can also include hiring movers. Not to mention the time off you might have to take from work to unpack everything and get settled.
It's a costly endeavor, and it leaves many eager to stay in one place for a long, long time – luckily that's the goal of your lease-option plans.
What many people don't know is that this expensive life change can be tax deductible
Who Can Deduct Moving Expenses from Taxes?
To deduct moving expenses from your taxes, you have to check off three boxes:
1. Your move must be within one year of when you start working at a new job.
You have to purchase or start renting to own your new home within one year of when you start working to qualify.
As we will explain later, you have to start working pretty immediately after you move. However, it is important to note that if your plan is to stay with a friend until you find a strong housing choice – don't let it last for too long. Signing and negotiating contracts can take some time. Plan to start your home search ahead of time so that you meet this qualification.
2. Your new job needs to be 50 miles further from your old home than your old job.
For example, if you lived and worked in Baltimore, starting a job in Washington D.C. would not be a tax-deductible move because the two cities are less than 50 miles apart.
To further elaborate, if you used to live in Baltimore, but worked in Washington D.C., your new job would need to be at least 90 miles away from your old home for it to qualify. As it's a 40-mile drive from Baltimore to Washington D.C., it would not qualify. In this scenario, starting a new job in Philadelphia would work because it is 100 miles away. Therefore, it is 60 miles further from your home than your old job.
If this is your first job, your new workplace must be at least 50 miles from your old home in order to justify a tax-deductible move.
Additionally, members of the Armed Forces don't need to meet the distance test if they are moving because of a permanent change of station. For more information on deducting military moving expenses, read through the IRS policies.
3. You've got to go to work.
You have to spend at least 39 weeks at work during the first 12 months after you arrive in the general area of your new job. There are about 52 weeks in the year, so, if you're moving and then looking for work, you have to find work within 13 weeks – or about 3 months.
More so, if you start working right away, you can't take more than three months worth of vacation or leave within the first year. Thankfully, time that you're out for an illness, a strike, a natural disaster or a layoff will count as working time.
These 39 weeks don't have to be consecutive – so if you've got the wiggle room, you can take time off. And you don't have to work at the same place for the full 39 weeks. So, if you have a filler job until you find your “dream” job, it counts!
There are loopholes for people that need them – like teachers. Teachers only work 36 weeks out of the year because that's when school is in session. Teachers and other similar seasonal employees are considered to have worked full-time for the entire year so long as their off-season is less than 6 months long.
For other variations on work time, check out the IRS Publication 521 on Moving Expenses.
What Can You Deduct?
If you checked off all the necessary boxes, you can deduct the cost of moving your belongings from your old home to your new home and your travel expenses. Travel expenses include hotel stays, but not your meals.
Note that your journey from your old home to your new home should be the shortest and most direct route possible. While you're welcome to look out the window, any pit stops that you make for sightseeing cannot be deducted.
If you drive, you can deduct what you actually spend on gas and oil that you use on your car if you keep accurate records. Or you can deduct 17 cents per mile that you travel (the standard rate). You can also deduct things like parking fees and tolls, but you cannot deduct maintenance, repairs, insurance or wear and tear on your car.
You can also deduct up to 30 days of storing as long as they're stored for the time immediately after they leave your old home and before they're delivered to your new home.
What You Cannot Deduct
There is a long list of items that you cannot deduct like:
- Car tags
- Drivers license
- Closing Costs
- Mortgage Fees
- Option Fees
- Security deposits
- Any part of your rent
- Any part of the purchase price of your new home
- Entering a lease
- Breaking your lease
- Mortgage penalties
- Real estate taxes
- Loss on the sale of your old home
- Home improvements to help sell your old house
- Losses from disposing of club memberships (like the gym)
- Pre-move house hunting expenses
- New carpets or drapes
- Return trips to your old home
Be sure to save the receipts from your move and share the details with your accountant to get your moving tax deductions!