Are Moving Expenses Tax Deductible?
As a general rule of thumb, you can deduct most, if not all, of your moving expenses if you move at least 50 miles away for work, but like any other tax-related subject, there are plenty of caveats and special circumstances that change the rules.
Hiring a professional moving company is probably more affordable than you think thanks to a large array of tax deductions that you can claim on your IRS returns.
How to Qualify
To qualify for moving deductions, you will likely need to meet three requirements. Your move must be closely related in both time and physical proximity to your place of employment, and it must pass both the distance and time tests.
Your move is closely related to the start of work -
The first requirement simply limits your deduction to any moving expenses you incur within one year of starting work, and your new home must be closer to your new job than your old home. In other words, you can deduct any qualifying expenses up to one year before and after you start work. You don't have to have a new job lined up when you move, but you must start work at a new location within one year of moving if you want to deduct those expenses. In addition, you can't deduct moving expenses if you will continue working at the same address, but you can continue working for the same company if you're transferred to a new job location. Your new home must be closer to your new job unless your employer requires you to live at your new home. You are also exempt from this rule if you can prove that your new home shortens your commute. For example, your new home actually adds an extra 10 miles to your commute, but because it's in a less populated area of the state, your new home shaves 20 minutes off your daily commute.
Distance test- Compared to the first requirement, the distance test is fairly straightforward. Your new job location must add at least 50 miles to your commute from your former home. Let's look at two examples: Your daily commute between your former home and former job was 30 miles each way, and your new job is located 70 miles away from your former home. Your new job only increases your daily commute by 40 miles, so you don't meet the distance test requirement. In the second example, your former commute was only 5 miles, and your new job is 60 miles away from your former home. If you remained in your former home, you'd increase your commute by 55 miles, so you do pass the distance test.
Time test -The time test simply requires that you work full time at least 39 weeks out of the first 12 months that you reside at your new address. Those 39 weeks don't have to be continuous, and you don't need to work for the same employer, but you do need to stay in the same general commuting area. Are you self-employed? If so, the 39-week time test doubles, so you'll need to work full time at least 78 weeks out of the first 24 months after your move.
By and large, all of your moving expenses are tax deductible if you meet those requirements.
- Basic expenses include things like packing materials, professional transportation and handling of your belongings, and travel costs between your former home and new home. You can either keep a detailed journal of all your travel expenses, excluding food, or you can use the default rate of 23 cents per mile. However, you can only deduct a single trip, and you can't deduct expenses related to vehicle maintenance, sightseeing, or other costs not directly related to your move.
- Don't forget to deduct your expenses for disconnecting your utilities at your former home and connecting them at your new address.
- Need to rent a storage unit? Storage costs are deductible as long as they occur within 30 days of your move.
- You can also deduct pet transportation costs.
- If you had to stay an extra day at your old residence after your belongings have been moved, you can deduct the lodging expenses.
- Members of the U.S. armed forces don't need to meet the three general requirements if they're moving because of a military order or a permanent change of station. Retiring members also qualify for moving deductions if they're moving from their last permanent station to a new home.
- Married couples filing jointly still need to meet the three basic requirements, but they can do so separately. For example, one spouse can fulfill the distance test, and the other can satisfy the time test. However, they cannot add their time together to meet the time requirement. One spouse must work full time at least 39 weeks out of the first year.
- Is your employer footing part or all of the bill for your move? You cannot deduct any reimbursed expenses from your tax return, but that's OK. You can still deduct any unreimbursed expenses, and reimbursed costs will end up saving you more money than tax deductions.
Other Tax Deductions
Go just a little deeper in the tax code and numerous other tax deductions and credits appear.
- Health Care -Some tax benefits don't even seem related to moving. For example, you'll need to report any change of address and employment to the health care marketplace if you purchased coverage online. As a result, your health care tax credit might change.
Home Profits - Single homeowners can deduct up to $250,000 of any profits they make on their homes, and married couples can deduct up to $500,000. This rule alone can reduce your tax burden by tens of thousands of dollars if your home has significantly increased in value since you purchased it.
Repairs, Closing Costs, & More - Typically, you can't deduct maintenance expenses for normal wear and tear on your home before you sell it, but you can deduct any repairs due to sudden or unexpected causes such as fires, floods, or vandalism. You can also deduct most closing costs. Home improvements that add square footage or replace building materials are tax deductible, but expenses associated with cleaning or restoration are not. For example, you can't deduct the cost to clean your carpets or add a fresh coat of water sealer to your deck, but you can deduct the cost to replace your carpet or build a new deck. Major upgrades like garage additions, kitchen remodels, and patio installations are covered.
How much these tax deductions will save you depends on three variables: your taxable income, filing status and deduction amount. A single filer who makes $60,000 per year and spends $4,000 on qualifying moving expenses will save $1,000 in taxes. A married couple who makes $250,000 and spends the exact same $4,000 in qualified moving expenses will save $1,320 in taxes. Additionally, particular deductions might increase or disappear entirely from year to year. The standard per-mile deduction was 23 cents in 2015, 23.5 cents in 2014, and 16.5 cents in 2010.
How to Choose a Moving Company
Now that you've learned how to save hundreds or even thousands of dollars on your move, the next step is to select a professional moving company that will safely deliver all of your furniture and other belongings to your new home. First, make sure that the companies you're considering are licensed by the Federal Motor Carrier Safety Administration for the same reason that you ought to hire licensed plumbers and electricians to work on your home.
Moving a long distance is stressful because you typically need to make the entire move in a single trip. That leaves a lot of uncertainty; will everything fit, and will all of your belongings be safe on a long journey? Allied Van Lines provides a personal assistant to every customer. Your assistant will respond to all your questions and concerns, so you won't need to speak with half a dozen employees who might or might not be on the same page about your particular move.
Your initial consultation will include an in-home inspection of your furniture and other belongings in order to provide a quote. Some budget movers are willing to do this step over the phone, but you could easily end up in a situation where you're trying to fit two couches into a moving truck that will only fit one. A visual inspection is vital to provide an accurate quote and ensure that the job proceeds smoothly. Your initial consultation is the perfect time to discuss different moving services.
Like any reputable moving company, Allied Van Lines will make sure that you have the packing supplies necessary to safely store all your belongings, and available moving services include everything from packing to furniture assembly at your new address. Need to make a change to your services? Whether you need to transport an additional vehicle or store some belongings in a climate-controlled facility while you settle in, your Allied Van Lines assistant will help fulfill your requests.