Getting a new home — whether you decide to buy or rent is a big choice. If doing so requires moving to a new town, the decision may be even more difficult. Packing up and leaving an old home behind can be labor-intensive and expensive. Some of your moving bills should and can be trimmed. If you are moving in the near future, consider some ways to score a tax break from your move.
Meeting the Requirements
To be able to deduct your expenses, you must meet certain IRS qualifications. Primarily, to be tax deductible, the purpose for your move must be related to employment — whether you are moving for a new position at your current company, a job relocation, a new job or returning to the US to retire after working abroad.
You must satisfy two general tests to claim moving-expense deductions. The distance test requires that your new job and your former residence are at least 50 miles farther than your previous job is from that home. If this is your first job, the location must be 50 miles from your old home.
Next is the time test, which requires that you work full time for a minimum of 39 weeks during the first year in your new location. However, these do not need to be consecutive or even with the same employer. If you are self-employed, you must work at least 78 weeks during the first two years after moving, including at least 39 in the first year.
Lastly, you cannot qualify for tax deductions if your employer reimburses you for the move. In fact, if that is the case, this money must be claimed as income on your tax return.
How to Tell What Counts
Once you determine that you qualify for some tax breaks, it’s time to reap the benefits. So what specific costs do and do not qualify for tax deductions? All reasonable costs associated with moving your family, vehicles or household and personal items to a new location qualify. This includes fees paid to professional packers and movers as well as possible storage and insurance needs for up to 30 days between homes.
Utility disconnection or connection fees on either end of the move can also qualify. In addition, certain travel expenses you incur during your move may be deductible, such as lodging, car rental, gas, tolls and airline or train tickets.
It’s important to keep in mind that not all home selling and homebuying costs can be claimed. Costs that do not qualify include home improvements, property taxes, new furniture delivery, security deposits, fees for new vehicle registration and license and any sightseeing expenses that come up during your travel.
To claim these moving deductions, you must submit all deductible relocation expenses on IRS Form 3903 with the personal tax return that covers the year of your move. Since moving can take up a lot of energy and a lot of your money, the potential for benefiting from tax deductions can help cushion the fiscal blow.
It’s important to keep track of all of your moving expenses in order to claim your deductions, but it’s also important to track them so you don’t overspend or miss bills. Moves can be logistical nightmares that can mean missing out on a credit card payment or a student loan notice. You can track your credit scores every month on Credit.com — a late payment will ding your scores (especially if you have a perfect payment history).
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