Relocating for Work – What Are the Tax Implications?
Approximately 50 million Americans move each year. While relocating for work, you may incur many moving expenses, some of which may be tax deductible if the move is work related. In addition, household or clothing items you donate to charities prior to the move could mean a deduction as well. Many job search expenses are also deductible. Read on to learn more…
Relocating for Work: What Moving Expenses Can You Deduct?
Relocating for work may be tax deductible, but you must meet the following IRS criteria:
Your move closely relates to the start of work: Your move is closely related to the start of work if it is within one year from the date you first reported to work at the new location and your new home is closer to your new job location than your former home was to your new job location.
You meet the distance test: Your new workplace must be at least 50 miles farther from your previous home than that home was from your previous job location. For instance, if you commuted 10 miles to your old job, your new job must be at least 60 miles from your former home. If you had no previous workplace, your new job location must be at least 50 miles from your old home.
You meet the time test: If you are an employee, you must work full-time for at least 39 weeks within the first 12 months after the relocation. The 39 weeks of work do not have to be consecutive. Some exceptions allow taxpayers to claim moving expenses even if the time rule is not met such as loss of job due to disability. Self-employed taxpayers must work double the amount of time in double the timeframe; they must work 78 weeks, which do not have to be consecutive, within the first 24 months after moving. But, 39 weeks of work must still occur within the first 12 months.
If you pass the IRS criteria for deducting moving expenses, you may generally deduct the cost of moving yourself, your family, and your belongings to the new location. Acceptable deductions include:
- Truck rental
- Moving truck
- Moving boxes
- Lodging (but not meals) while traveling
- Storage units (up to 30 days)
Because these eligible expenses are “above-the-line” deductions, even if you don’t claim itemized deductions, you can claim these expenses as long as they are not reimbursed or reimbursable by your employer.
While weeding out items you didn’t want to take with you, you may have come across another potential tax deduction – charitable donations. But take the following steps upon donating to a qualified charity. First, make sure to keep records of your deduction by keeping receipts. Second, make sure donated clothing and household items are in good used condition, which generally means that they could be sold at a consignment or thrift store. Charitable contributions can only be claimed as itemized deductions.
Deducting Job Search Expenses
If your move was for a new job in your field of work – but not your first job – you may be able to claim a tax deduction for job search expenses. Eligible expenses include:
- Résumé development
- Professional coaching
- Job placement or recruiter services
- Unreimbursed mileage
- Unreimbursed airfare and hotel expenses for interview travel
(Job search expenses are miscellaneous itemized deductions, which are subject to a 2% of adjusted gross income (AGI) floor.)
Relocating can be an expensive and complex venture, but maintaining good records of the related expenses – and understanding the tax deductions available to you could lead to tax savings in the long run.
Remember, you can always enlist a tax expert’s help. Get matched with a tax advisor who best meets your needs now.