If you're looking for a terrific way to save money on your taxes, try this: Quit your job, sell your house, uproot your whole life and move across the country. Write off the U-Haul, the hotels and the meals you ate while relocating, and there you are – flush with money that can't be touched by Uncle Sam!
Not so fast. Even if this cunning plan didn't sound like way more trouble than it's worth, the IRS has rules about which moving expenses are tax-deductible and which ones aren't. Those moving expenses you incur when you're just sick of living with your roommate's ferret and finally save up for a security deposit on a basement studio down the street: Those are out. But if your move is the result of a new job or job relocation, get out your calculator, because you can absolutely write off much of what you spend moving.
The rules are pretty clear, and not as strict as you might imagine. The gist is that moving expenses can be deducted as long as the move is due to a new job or business. You'll need more than just a change of address card, though; you have to qualify based on one of two criteria. The first is the time test, which states that you have to work 39 weeks in the 12 months after you arrive at the new location. (If you move late in the year and expect to meet the 39-week requirement after your taxes are due, you can also claim it -- but you'll have to file an amendment if you don't.)
Don't meet the time test? Don't give up hope yet. You may still meet the distance test, which says that your new job is at least 50 miles (80 kilometers) farther from your former home than your old job was. So if your old job was 10 miles (16 kilometers) from your old house, the new job has to be 60 miles (96 kilometers) or more from the old place.
One more thing: All of this moving around needs to be closely related to the new job, both in terms of when you move and where you move. So, if you decide to grit your teeth through a massive commute for a couple of years while you save up for a house closer your new job, you unfortunately won't get to deduct the cost of the move once you actually move in. At that point, you'd be close in terms of distance, but not in terms of time.
Now that you know you've met one of the criteria, what can you deduct? You can't deduct the cost of the new home itself, or the food you eat on the way – or any expenses your employer reimburses you for. You can, however, include transportation costs, storage for 30 days, and even the cost of packing and shipping household or personal goods [source: IRS]. Don't forget to include lodging costs as you travel to the new location, and even costs incurred on the day you arrive.
A bonus? You can write off the costs for the entire household, not just yourself. So what are you waiting for? Get moving!
- Alderman, Jason. "Don't Ignore Tax Deduction for Moving Expenses." Huffington Post. Oct. 30, 2013. (Sept. 15, 2014) http://www.huffingtonpost.com/jason-alderman/dont-ignore-tax-deduction_b_4178223.html
- Internal Revenue Service. "Publication 521." (Sept. 15, 2014) http://www.irs.gov/publications/p521/ar02.html#en_US_2013_publink1000203491
- Pulawski, Shirley. "How to Qualify for Tax Deductible Moving Expenses." Lifehacker. March 6, 2014. (Sept. 15, 2014) http://lifehacker.com/how-to-qualify-for-tax-deductible-moving-expenses-1537689884
- Internal Revenue Service. "Moving Expenses." Aug. 18, 2014. (Sept. 15, 2014) http://www.irs.gov/taxtopics/tc455.html
- TurboTax. "IRS Moving Expense Deductions." Intuit. 2013. (Sept. 15, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/IRS-Moving-Expense-Deductions/INF14389.html