Before we start we must state that deductibility is only applicable when the expenses are paid out of pockets and are not reimbursed by the employer. When deductible expenses are reimbursed or paid direct to a vendor by a transferee’s employer they become excludable from income but are not deductible. Deducting a cost that was not actually out of pocket would constitute double dipping. If you have questions regarding your relocation program speak with your company before filing any paperwork.
One of the principal reasons why people turn down relocation packages offered to them by their employers is the all-important issue of cost. Moving is expensive. Although many companies offer relocation packages that cover associated costs of movers and travel, not every employee receives the same benefit. But there’s good news. The IRS allows you to deduct some moving expenses on your federal tax return. Not all expenses are allowed, but there are enough available deductions to make it an effort worth your while. Here’s a quick list of what the IRS considers deductible moving expenses.
Household goods moving costs.Allowable deductions include any money spent on packing, crating and transporting your belongings, automobiles and pets. Temporary storage costs are also applicable (up to 30 days).
Utility disconnect and reconnect fees.
Travel expenses.This includes airfare, bus fare or train fare. It also includes hotel stays during travel, but doesn’t include meals. Any entertainment you take in or restaurant visits you pay will have to come out of your own pocket. You’re also required to take the most direct route available, which means no extended layovers in vacation spots along the way will be deductible.
Car travel expenses.If you decide to do your own moving or drive your car, you can deduct a standard mileage rate of 23.5 cents per mile (in 2014). Or, if you’re especially good at keeping records and tracking receipts, you can deduct the actual cost of your car travel including gas costs. Tolls and parking fees can also be included. General maintenance and incidental car repair while moving isn’t deductible.
Moving Expenses Are an Above the Line Deduction
Here’s another thing many people aren’t aware of: your moving expenses are considered “above the line deductions.” In other words, the amount of money you spend on a move can be subtracted from your gross income, thus lowering your adjusted gross income when you file. Even better, above the line deductions can be taken even if you don’t itemize your deductions on your tax return.
Meeting the Requirements
In order to be able to claim moving expenses on your federal tax return, you have to meet three IRS Requirements.
Closely related in time.In most cases you can deduct expenses incurred within 1 year from the date you first reported to work at the new location as closely related in time to the start of work. If you do not move within 1 year of your start date in the new location, you may not be able to deduct expenses.
The Distance Test.The IRS stipulates that your new home has to be “at least 50 miles farther from your old home than your old job location was from your old home.” If you’re moving for a new job, the location of that job has to be at least 50 miles away from your old home.
The Time Test.According to the IRS rules, “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.” If you don't meet these criteria, you may not be able to deduct your moving expenses.
Get the Facts
For all of the specifics on claiming moving expenses on your federal tax return, read IRS Publication 521. Since allowances and restrictions may change from one year to the next, be sure that the form you read matches the year of your move.