Questions about moving expenses and whether those expenses can be deducted come up periodically with my clients.
Here’s a basic overview.
Are You Eligible for a Deduction for Your Move?
There are two hurdles to clear in order to deduct moving expenses:
One: The Time Test
To meet the “time test,” you must be employed full-time in your new location for at least 39 weeks out of the first 12 months after the date of your move. If a person is self-employed, they must be self-employed for at least 78 weeks out of the first 24 months after the date of the move.
The time test doesn’t have to be met at the time you file your tax return claiming the moving expenses. But if something happens and you no longer meet the time test, you’ll lose the deduction. That situation is dealt with by either: 1) amending the prior return to take away the deduction, or 2) claiming the prior deduction as income in the current year. I’ll go into more detail about this in a future post.
Two: The Distance Test
This can be a bit confusing. Here’s how the IRS words it in Publication 521:
Your move will meet the distance test if your new main job location is at least 50 miles farther from your former home than your old main job location was from your former home.
What this is saying is, if you’d stayed in your old home but started your new job, would your commute be at least 50 miles longer than your commute from your old home to your old job?
Clear as mud? Here’s an example:
Joe lives and works in Des Moines. His house is 2 miles away from his workplace. Joe takes a job in Iowa City and moves to Iowa City. Joe meets the distance test if his new workplace in Iowa City is at least 52 miles from his old house in Des Moines. (He’d meet this test because Iowa City is 100+ miles away from most locations in the Des Moines Metro Area.)
Now that we’ve established how to qualify for a deduction, we’ll get into what’s deductible and what’s not in the next part.