There are plenty of ways for people planning to move to cut costs. Possibly one of the lesser-known ways to save money on a move, however, is through potential deductions filed with the IRS. If you have moved because of a new job or a change in business location, you may be able to deduct your moving expenses from your annual taxes. The following information may serve as an introduction to the topic, but tax law is complicated enough to warrant following through by conducting your own personal research as well as speaking with advisors. Here is an overview of some of the guidelines as described by the Internal Revenue Service at the time of this article being written.
There are two tests you may need to pass in order to be able to deduct moving expenses. The first is referred to as the distance test. In order to satisfy this requirement, your new office must be at least 50 miles farther from your old home than your previous place of business was. If you were unemployed or worked at home, the new job location must be farther than 50 miles than your old home, according to the IRS.
The second test is based on time spent at the new job location. You will need to work full-time for 39 weeks or more within the first year of moving to the new area. Self-employed workers will have to meet that time requirement in addition to working 78 weeks in the first two years of the move. Simply put, workers at home should simply double the time requirement for full-time workers.
Once you have satisfied both of these test you may be able to file a form with the IRS to deduct moving expenses as an adjustment to your income. Members of the armed forces who moved as a result of military order could be exempt from meeting these standards.
Filling the forms
There are two forms that you may have to fill out. The first, form 3903, is designed to help you determine the total of your moving expenses that you can deduct. First, you will total the expenses associated with transportation and storage of your household goods and personal effects. Then you will add the cost of traveling between homes. Meals are not included in deductible expenses, but the cost of lodging does qualify for deductions. Finally, you subtract the amount of money your employer paid to cover these expenses from the total. The remaining sum is your moving expense deduction. The second document is form 1040, by which you fill out your individual income tax return.
The importance of records
While these forms aren't filled out until after you've moved, it may be a good idea to start keeping records of your expenses well before moving, especially if you plan on staying at your new job for at least 39 weeks after your arrival.
An easy way to keep track of expenses is to designate a journal or a binder as a record for your moving expenses. Keep the binder well organized, with plenty of sub-categories for packing materials, storage facilities, the cost of movers, receipts for gas and other common expenses. The more meticulous you are, the more accurate your deductions could be. You can also utilize apps such as My Move to not only estimate the cost of moving, but to take notes for actual expenses over the course of your transition.