Can you get an income tax deduction for your moving expenses? It depends. If you moved your home due to a change in your job or business location, or because you started a new job or business, you may be able to deduct your moving expenses. The move must be because of a job. It doesn't matter if it's a new job, the same job or your first job.
Moving expense is an "above the line" deduction, meaning it is taken on the first page of your 1040 and you do not have to itemize to use it.
Your move must be closely related, both in time and in place, to the start of work at your new job location. Generally, moving expenses incurred within 1 year from the date you started work at the new location is considered closely related in time to the start of work. You can move before finding work, as long as you actually go to work in that location.
You must pas a two-prong test. 1. The "distance test." Your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home. 2. The "time test." 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.
If you are a member of the armed forces and you moved pursuant to a military order for a permanent change of station, you do not have to satisfy the "distance or time tests". There are additional exceptions to the time test in case of death, disability and involuntary separation.
Your home can be a house, apartment, condominium, houseboat, house trailer, or similar dwelling. It does not include a seasonal home, such as a summer beach cottage.
For a married couple filing jointly, only one spouse needs to meet both the time and distance tests. This can be a big help. For example, if husband is transferred to a new location 40 miles from home - that does not pass the distance test for deductibility. But if wife is self-employed and works at home, if they move 50 or more miles from their current home, then they could deduct the moving expenses because of the wife's self-employed status. She would then have to meet the 39 and 78 week rule.
Typical moving expense includes the cost of packing, crating and transporting house hold goods and personal effects as well as the members of the household from the old home to the new one. The cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the items have been removed form the old home before they are delivered to the new home are deductible. Also deductible are the costs of connecting and disconnecting utilities and the costs of shipping vehicles or pets to the new home (who knew the cat gets a moving expense deduction?). The cost of transportation and lodging for the employee and his or her household while traveling are deductible including one day for the day after vacating the old home and one day after arriving at the new home. The cost of meals is not deductible. Expenses are deductible for only one trip by the employer and the employer's household. They need not travel together.
If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either: 1) Your actual expenses, including gas and oil, if you keep an accurate record of each expense, or the standard mileage rate of 16½ cents per mile. Whether you use actual expenses or the standard mileage rate you can deduct parking fees and tolls. You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car.
Report your moving expenses on Form 3903 which is attached to your Form 1040. If your employer reimburses you for moving expense on a tax-free basis, obviously, they cannot be deducted. You can only deduct expense in excess of any employer tax-free reimbursement. If your employer has included in Box 1 or your W-2 any payments for moving expenses, meaning the employer is reporting the payments as taxable compensation income, then you may deduct them on Form 3903.
You can deduct moving expenses on your 2010 tax return even though you have not met the time test by the date your 2010 1040 is due. If you deduct moving expenses but do not meet the time test in 2011 or 2012, you must either 1) report your moving expense deduction as other income for the year you cannot meet the test, or 2) amend your 2010 return to remove the moving expense deduction.