Real Estate & Mortgage Insights

Who Can Claim Moving Expenses with the IRS?

Not everyone who moves can deduct moving expenses when they file their income tax returns. Your move has to be work-related, meaning you changed job locations, started a new job, or moved to seek a new job and were successful in obtaining one.

There are exceptions for retirees and survivors who are moving back to the U.S. from oversees.

And there are (of course) conditions.

The IRS calls these conditions “tests.” The “time” test, the “distance" test and the “work-related” test.

The Work Related Test

Say you pick up all your stuff and move. It isn’t actually necessary that you already have a job in the new location. If your moving expenses occurred within one year of the date you first report on the job in the new location, your move is “work-related.”

So… what happens if you delay moving your family and household until 18 months after you start work because you want your son or daughter to finish high school at their old school?

Well, the IRS isn’t entirely heartless. They make exceptions if you have a good reason.

The Distance Test

Your new job location has to be at least 50 miles further from your home than your old job location.

For example, say you used to drive 15 miles to work from your previous home. That means you new job must be at least 65 miles away from where you used to live. Otherwise, you don’t meet the “distance” test.

This doesn’t mean that you have to move 50 miles. All it means is that your new job must be 50 miles further from your former home than your old job.

The Time Test

The time test varies depending on whether you are classified as an employee or whether you are self-employed.

If you are an employee, then after you move to your new area you must work full-time for at least 39 weeks out of the next twelve months. You don’t have to work for the same employer and you don’t have to work 39 weeks in a row, but…

…basically, you have to work 9 out of the next twelve months in your new commuting area.

If you’re away from work temporarily, like a vacation, or sick, or can’t work because your union is on strike or your employer has locked you out…

…that counts as work.

See? The IRS does have a heart!

What if you’re a teacher who normally works only nine months out of the year? If you spend six months working during the school year…that counts. It is a similar situation for other seasonal workers.

If you’re self-employed, the “time test” is essentially the same, but doubled. You have to work 78 weeks out of the next 24 months after the move. You have to work full-time. Being semi-retired and goofing off on the internet for a couple hours a day on one of those late night television “get-rich-quick” schemes doesn’t count.

You really have to work full-time.

Conclusion

You're probably wondering what you can deduct.

Umm...(furtively looking to the left and right)...

We're out of space.

And you really should ask an income tax accountant to handle that one for you.

More real estate related income tax articles.



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