10 Creative (But Legal) Tax Deductions


Moving Expenses

Couple, moving truck
The IRS uses time and distance to determine who qualifies for the moving expense deduction. Image Source/Getty Images

If you move to another town for a new job, the Internal Revenue Service (IRS) will let you deduct a portion of those expenses from your taxable income. But did you know that you can even deduct moving expenses if you're self-employed? Or if you get fired from the job that you moved for in the first place? Yup, the IRS is uncharacteristically generous with this one, so take full advantage!

The IRS applies two basic "tests" to determine if you can deduct moving expenses: distance and time. First, the distance test: If you move for a new job -- or even to find a new job -- the new location must be at least 50 miles (80 kilometers) farther than the distance of your old commute [source: IRS]. So if you used to drive 30 miles (48 kilometers) to work, the new location must be at least 80 miles (129 kilometers) from your old home. If you're self-employed and work from home, then you only have to move 50 miles away, which can be as close as the neighboring city or town.

Now the time test: Once you move into your new location, you must be employed full time for at least 39 weeks of the next 12 months. What's great about this is that you don't have to work for the same company that brought you out to the new location. Even if you quit that job or get canned, you can still deduct the moving expenses if you get another job in the same geographical area that keeps you employed for the minimum 39 weeks. Note that if you're self-employed, the time rule is more strict; you must remain employed full time for at least 78 weeks of the next 24 months after the move [source: IRS].

What exactly does the IRS let you deduct as moving expenses?

  • Packing and shipping costs (moving company, for example)
  • Up to 30 days of storage
  • Travel to the new home including gas at $0.17 a mile
  • Hotel rooms, but not meals
  • Disconnecting utilities at the old home and connecting new ones [source: Turbotax].

The cool thing about moving expense deductions is that they're an "above the line" deduction, meaning you don't have to itemize deductions to claim them [source: Bischoff]. Now let's look at some ways to get creative with education expenses.