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"Thanks
for the tips on moving expense deductions. We had no idea that we
could write off the moving costs. We saved $4320.00 on our taxes this
year!"
Cynthia Shepherd
Dallas
HomeBuyer Resource Center
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Moving Expenses
If you moved to a new town to take a job during 2002, good news.
You probably don’t have to pay all of the costs. If your
employer didn’t pick up the tab, Uncle Sam might take care of
some of the partial costs.
Which moving expenses are
deductible?
The moving expense deduction has changed a lot over
the years. For 2002, it’s simple.
General deductions for
moving your family and possessions are:
Required lodging
(but not meals) en route to your new home.
Cost of moving
household goods and personal effects.
Temporary storage of
your household goods (up to 30 days).
Qualified moving
expenses are treated as an adjustment to income. This means that
you can deduct them whether or not you itemize deductions.
You’ll need file Form 1040 (the long form) and attach Form 3903.
Of course, not all moves are deductible. In order to
deduct your moving expenses, you have to meet two tests:
Time
You must begin working as a full-time employee within 13
weeks of your move, and you must work at least 39 weeks during
the 12 months after your move. And it doesn’t matter whether you
were transferred by your employer or you took a brand new job.
Your move doesn’t even have to be “work-related,” as long as you
have a full-time job in the new location.
Distance
To
meet this test, your new job has to be at least 50 miles further
from your old home than your old job was. If you didn’t have a
job before the move, your new job has to be at least 50 miles
from your old home.
Two more details:
Your
move has to make your commute shorter than it was prior to your
move. In other words, the IRS won’t allow you to deduct your
move if you move further away. Finally, your move must be
closely related to the start of your new job. Generally, this
means you have to incur and pay your moving expenses within a
year of starting the job, unless circumstances prevented you
from moving earlier.
Remember, for most taxpayers,
expenses are deductible in the year they were paid, regardless
of when they were incurred.
What could be better than a
tax deduction? How about your employer paying for your move?
Many employers will pay some or all of the cost of the move when
they transfer an employee to a new area. These payments of
qualified moving expenses are excluded from your taxable income
and should be noted with a code P in box 12 of your W-2. But be
aware of this: Some employers pay for things that would not be
deductible — possibly because they’re just being nice, but
probably because they used to be deductible. If your employer
pays for things like the expense of selling your old home,
buying a new home, breaking a lease, acquiring a new lease,
temporary housing or meals eaten during your move, these amounts
must be included in your taxable income. The employer will
probably add them to Box 1 of your W-2.
But even with
the additional tax, it’s a pretty good deal.
*If you’re
self-employed in the new location, you must also work at least
78 weeks during the first 24 months. |
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