Are Moving Costs Tax-Deductible?

Moving costs can be expensive, so any time you can save a buck, you want to take that opportunity. One common way people look to save some money is on their taxes, so you may be asking yourself if moving expenses are tax deductible. The answer to this is neither yes nor no. Let’s explore that so you can see where you fit in.

Tax Deductible Means Deducted from Taxable Income

A tax deductible expense is an expense that can be deducted from your taxable income. A tax credit on the other hand, can be deducted from the actual amount of tax that you owe. So, if you are eligible to deduct your moving costs when filing your taxes, you will deduct them from your taxable income, and not from the total tax you owe. So, for those of you who don’t qualify, don’t be all that disappointed. Tax deductible expenses, unless significantly large, do not have a huge baring on the total amount of tax that you owe. Nevertheless, if you can save the money, you should. So now, let’s see how you qualify.

Required Conditions to Deduct Moving Costs

There are conditions that must be met in order for your moving costs to be tax deductible. The IRS calls these the Distance Test and the Time Test.

The Distance Test – The first condition is part of the Distance Test. You have to have moved due to a new job, or because your current job relocated you. The second condition is also part of the Distance Test. The move must be 50 miles or more from where you currently live.

The Time Test – The third condition, which is the Time Test, is that once you move, you must work for 39 weeks within a one year period. This time requirement must be completed during the 12 months immediately following your move. If you change jobs, however, after you move, that still counts towards your 39 weeks.

If you are married, and you file a joint tax return, only one spouse has to meet the moving requirements.

What You Can Deduct

You are able to deduct all packaging costs, insurance, moving company costs, rental vehicle costs, mileage and lodging. You cannot deduct the cost of meals. So, if you buy your movers a pizza, you can’t deduct that, but if your move is such a distance that you have to stay in a hotel overnight, you can deduct that expense. You also cannot deduct house hunting expenses, or penalties incurred from canceling memberships, or contracts, including rental agreements. Also, anything that your new job or current job pays for, or reimburses you for, you cannot deduct when filing your taxes. Just make sure that you save the receipts from everything, so that you can submit them to your accountant when preparing your taxes.

For additional information about deducting moving costs when filing your taxes, you should speak with your accountant, and visit the IRS website.