Moving is costly, so when you can save a few bucks on your expenses, so much the better. Luckily, the IRS gives fairly generous tax deductions for moving expenses if your move qualifies under their criteria. To expect your relocation costs to become tax deductible, the move has to be related to employment. If your boss told you your position is being uprooted and you have to move to another city to head up a new department, many costs would be covered.
It also has to be within a certain distance of your previous home, and you have to remain working in that job capacity for a certain length of time.
However, if you decide to move your family on your own for other non-work-related reasons, you won’t be eligible to write off those expenses.
Going the Distance
The top criteria for qualifying for moving expense deductions is this: your new home has to be 50 miles or more from your previous job and home.
Timing
Like we said above, your move has to be work-related. You have to start the new job within one year of the move. In addition, you have to work full time for your new employer for at least 39 weeks within the first year after the move. Are you self-employed? This criteria is extended to 78 weeks within the first two years after your move.
Note: you may qualify for a time and distance exception if you were to lose your job in a situation out of your control, or if you are a member of the Armed Forces and are facing a permanent change in station.
Deductible Moving Expenses
In general, you can deduct the costs of:
- Moving household goods and personal effects
- Travel
Household goods and personal effects: These include the costs of hauling a trailer, packing, crating, insurance and in-transit storage. If you buy furniture or other goods on the way from your old home to the new one, you cannot deduct those costs.
Approved expenses for deductions include:
- Professional moving company services
- DIY moving trucks or pods
- Gas if traveling by car
- Packing supplies such as boxes, tape and blankets
- Moving insurance
- Storage for up to one month after your goods are moved and before they are delivered to the new home
Travel: This includes the cost of lodging (not meals), car expenses and air fare you may need in transit from your old home to the new one. You can deduct actual out-of-pocket expenses or claim the standard mileage rate of 17 cents per mile.
Parking fees and tolls are deductible, but car repairs, general maintenance, insurance, or depreciation of your vehicle do not qualify. Nor are unnecessary side trips or extravagant forms of lodging.
To deduct the above moving expenses, it’s imperative to keep all receipts that outline not only the amount you spent on the actual move (this includes your moving company or a rented truck), but also the cost of storage, insurance, utility connections/disconnections, vehicle transport costs, and travel and lodging expenses.
When married and filing jointly, only one of the two people has to meet the criteria for the time and distance tests. But keep in mind, you can’t combine employment periods to meet the time test criteria.
Non-Deductible Expenses
Now that you know what you can deduct, here’s what you can’t, according to IRS Form 3903:
- Any part of the purchase price of your new home.
- Driver’s license.
- Car tags.
- Expenses of buying or selling a home (including points, closing costs,
and mortgage fees). - Expenses of entering into or breaking a lease.
- Real estate taxes.
- Home improvements to aid in selling your home.
- Loss on the sale of your home.
- Losses from canceling memberships in clubs.
- Mortgage penalties.
- Refitting of draperies and carpeting.
- Return trips to your former home.
- Security deposits.
- Storage charges except those incurred in transit and those for foreign moves.
You may not deduct house hunting trips if you go to the new city prior to moving. You also can’t deduct expenses that your employer already reimbursed you for.
Other Ways to Save
If you fail to qualify for tax write-offs and your employer isn’t being much help, there are other ways you can save on moving costs:
- Do more yourself. Handle your own packing, loading, and unloading. Hire labor-only moves. Gather a few quotes on movers to make the most informed and affordable decision.
- Time your move right. Book a moving company during off-peak times to save money. In addition, many movers offer lower rates at mid-month, mid-week, during winter or fall, and early in the morning.
- Comparison shop. Professional mover costs vary across the board. Check reviews, ask for references, check the Better Business Bureau (BBB) ratings, and look into insurance to further protect your belongings.
- Get free boxes. You’ll find these at your local grocery, liquor store, retailer, or even library.
- Move few items. Purge before you move. Donate or sell things you don’t need or want any longer. Why pay to more to move stuff that no longer serves you? Lower your moving costs by moving less stuff.
It’s always a good idea to talk with your tax accountant to review these deductible and non-deductible expenses. He or she can verify with you on what you can and cannot claim on your taxes in the name of a residential or commercial move. Your accountant is up to date on the latest laws and can give you tips to navigating tax-time deductions related to a work relocation.
Contact Dependable Movers
Moving can be expensive, which is why every little deduction you can make on your taxes is helpful. If you’re facing a San Francisco area move in the near future, Dependable Movers would be happy to help get you there. We offer free quotes when you contact us at 415-449-7471.