CARL WATTS & ASSOCIATES

August 03, 2015

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There are many different reasons for people to move or relocate, some imply important life events such as marriage or retirement, some are due to lifestyle changes, and some are caused by a new job or the need to search for a new job. No matter the reason, moving can be complicated, time consuming, and, not in the least, expensive.


Those of you moving to start a new job or a new business, transferring with a current employer or even returning to the U.S. to retire after working abroad, should consider that moving expenses may be deductible on your federal income tax as an adjustment to income.

There are, evidently, certain requirements and circumstances that will enable you to claim the deduction and they are mainly explained in IRS Publication 521, Moving Expenses, but don’t worry, you can find the abridged version right here.

First of all, you can deduct your moving expenses if you meet all three of the following requirements:

  • Your move closely relates to the start of work;
  • You meet the distance test;
  • You meet the time test.

Your move must closely relate both in time and in place to the start of work at your new location. You can consider moving expenses incurred within one year from the date you first reported to work at the new location as closely related in time to the start of work. A move generally relates closely in place if the distance from your new home to the new job location is not more than the distance from your former home to the new job location.


The Distance Test

Your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home.

The Time Test

If you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months immediately following your arrival in the general area of your new work location. There are exceptions to the time test in case of death, disability and involuntary separation, among other things.


If you are married, file a joint return, and both you and your spouse work full-time, either of you can satisfy the full-time work test. However, you cannot add the weeks your spouse worked to the weeks you worked to satisfy that test.

If you are a retiree who was working abroad or a survivor of a decedent who was working abroad and you move to the United States or one of its possessions, you do not have to meet the time test. However, you must meet other special requirements. If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction for that move.

If you are a member of the Armed Forces and your move was due to a military order and permanent change of station, you do not have to satisfy the distance or time tests.

Now that we figured out who can take the deduction, let’s see what kind of moving expenses qualify for this adjustment to income.

The IRS explains that you can deduct any reasonable expenses of moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and traveling (including lodging but not meals) to your new home.

You can deduct only those expenses that are reasonable for the circumstances of your move. For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. If during your trip to your new home, you stop over, or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses.
Adjustements to Income -
Moving Expenses Deduction
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Moving expenses that qualify for deduction include:

  • Costs for packing and transporting household goods, personal effects, pets and vehicles. This includes fees paid to professional packers and movers.
  • The cost of moving personal belongings from someplace other than your old residence (such as a summer home or a relative's home), limited to the amount it would have cost to move them from your previous home.
  • Fees to disconnect and/or connect utilities at either end of the move.
  • Travel costs for you and your household members (by the most direct route available by conventional transportation) to your new home, including one day's lodging along the way. However, meals cannot be charged. Family members needn't move at the same time as you, nor by the same means of transportation. If, for example, you drove, but your family later flew to the new location, both sets of moving expenses would be deductible.
  • Use of your car during the move, either by claiming actual expenses, or by claiming the standard mileage rate of 23 cents per mile for tax year 2015 (the rate was 23,5 cents per mile for tax year 2014). For either method, you can add parking fees and tolls.
  • Storing and insuring your possessions for up to 30 days after they leave your former home but before being delivered to your new home; for example, if there's a lag before you can move in.

And here are some expenses that do not qualify:

  • Expenses of buying or selling a home, including closing costs, mortgage fees, points, pre-move house-hunting expenses, home improvements or new furnishings. (Real estate taxes may be eligible for a deduction if you itemize).
  • Loss on the sale of your old home.
  • Return trips to your former residence.
  • Charges for signing or breaking a lease.
  • Fees for new car tags or driver's license in your new locale.
  • Expenses incurred on side trips en route to your new home (e.g., sightseeing along the way).
  • Losses from closing club memberships.
  • Security deposits (including any given up due to the move).
  • Storage charges except those incurred in transit and for foreign moves.
  • Also, you cannot take a moving expense deduction and a business expense deduction for the same expenses.

If your employer reimburses you for any deductible expenses, you must reduce your moving deduction by that amount. Also, keep in mind that employer reimbursement for non-deductible expenses will likely be treated as wages on your W-2 Form.

To figure your moving expenses deduction, you must complete Form 3903 and attach it to your Form 1040 (you cannot claim moving expenses on a 1040EZ). Because it is an above-the-line deduction, you do not need to complete a Schedule A.

If you were not reimbursed, you can deduct your moving expenses in the year you paid or incurred the expenses.


If you are reimbursed for your expenses and you use the cash method of accounting, you can deduct your expenses either in the year you paid them or in the year you received the reimbursement. If you use the cash method of accounting, you can choose to deduct the expenses in the year you are reimbursed even though you paid the expenses in a different year.

So, now that you are better informed, you will certainly appreciate more the assistance that a tax professional can offer you in all your dealings with taxes and the IRS.