From sourcing the needed moving supplies, to the cost of hiring a moving company or renting a truck, the closing costs involved if you’re looking to buy a home and other moving expenses, the costs can really rack up.
That’s even more so if you decide to go the moving company route and settle for full service movers who undoubtedly offer many advantages, but at a cost. If you can swing it, though, they’re well worth it, as you’ll find out.
Good thing is, there are always things you can do to bring your moving costs down and other things you can do to recoup some of the costs incurred during your relocation.
It is to the latter that we’d like to shift your focus.
Did you know it is possible to deduct moving expenses when doing your returns? Yup. The IRS – and even a handful of state governments (numbering less than 10) – allow for taxpayers to deduct their moving expenses provided certain criteria are met.
In the case of state deductions, the provisions will vary from one state to the next, so check what the requirements in your respective state are.
Federal Returns: Qualifying for Moving Expense Deductions
According to the IRS, there are three requirements you must meet before you can qualify for moving expense deductions:
- It must be within 12 months of the commencement of a job. Moving expenses can only be deducted if you relocated within one year of the day you started your job. In other words, you cannot deduct moving expenses if you did not move closer to work within the first 12 months of employment.
- Should you remain in your old home, you’re eligible for moving expense deduction if your new job adds at least 50 miles to your commute.
- Following your relocation and new employment, you must work at least 39 weeks full-time at your new place of work during those first 12 months of employment. If you’re self-employed, you must show that you’ve worked full-time at least 78 weeks during the first 24 months since you started working there.
Things You Need to Claim the Deduction
You’ll need some form of documentation to prove that you qualify for moving expense deduction.
According to the IRS, you will need:
- Mileage logs
- Credit card statements
- Canceled checks
Generally, it’s advisable to keep any move-related documents that can be used to verify your moving costs should any queries arise after filing your tax returns.
What CAN and CANNOT be Deducted
As to what exactly can be deducted, it’s normally expenses to do with the move in question, albeit not all.
According to the IRS, deductible moving expenses include reasonable expenses related to household possessions and personal effects, as well as costs of moving to your new home (for example, moving company costs if you’re using a professional mover).
In a nutshell, deductible moving expenses include:
- Cost of packing and shipping your household belongings
- Transportation costs for you and your family members
- Any lodging expenses incurred during the move
Moving expenses that CANNOT be deducted include:
- Cost of meals incurred during the move
- Cost of selling your old home or breaking a rental agreement
- Any of your new home’s purchase price
- Any moving expenses for which you have received reimbursement from your employer
What to File When Claiming your Moving Expense Deductions
Usually, there are additional tax forms you need to file when claiming any tax deduction.
In addition to forms such as the 1040, 1040A, or 1040EZ that you use to file your federal income tax returns, in the case of Moving Expenses, you’ll also need to file Form 3903.
So, How Much Can I Claim?
According to the IRS Publication 521 which covers deductions associated with moving expenses, there is no fixed dollar limit when it comes to deductible moving expenses.
To reiterate our previous point, however, it is a good idea to keep all documentation pertaining to the move even if your expenses qualify for deduction, especially if you’re looking at deducting a significant sum.
In closing, we could say a moving expense deduction is a godsend. Not only is it a way to lower your taxable income, but it can help minimize moving-related stress by offsetting your moving expenses.