The IRS is pretty generous when it comes to moving expenses. For example, if you move for a job or business-related purpose, you can deduct certain expenses in the tax years that you move.
You can also deduct any costs associated with traveling to your new residence, such as gas and public transportation fares.
This guide will dive into the details of what you can deduct when moving expenses. We’ll also discuss in more detail how to fill out Form 3903 and how to apply the deduction on your taxes.
By the end of this guide, you’ll be better prepared to maximize your savings when it comes time to file your taxes. So let’s get started!
What Are Common Moving Expenses?
When it comes to the type of expenses you can deduct, the rules vary depending on your specific situation. Generally speaking, you can deduct any reasonable expense related to moving and storing your goods necessary for a new job relocation.
This includes packing materials and boxes, transportation costs for transporting your goods from one place to another, temporary storage fees, and reimbursement for any meals and lodging incurred during the move.
In some cases, you may also be able to deduct the cost of purchasing moving insurance. And as we stated in the open, you can deduct mileage expenses if you drive yourself. However, it’s only at the rate approved by the IRS — currently, 22 cents is the standard mileage rate as of June 2022.
It’s important to note that any tolls related to purchasing a new home, like closing costs or renovation costs, cannot be deducted under the moving expense deduction.
Additionally, if you don’t actually move and take a job in a new location but simply have your goods shipped, you won’t be able to take the deduction.
Be sure to consult a tax professional if you need help understanding what expenses are allowed as part of the moving tax deduction and any other deductions related to your move. They can help ensure that all your relocation costs are deductible and that you get back every penny you’re owed.
Are Moving Expenses Tax Deductible?
Absolutely — with provisions. As you’ve read thus far, you may be able to deduct certain job relocation expenses. However, the IRS has specific rules and restrictions when it comes to taking advantage of moving expense reimbursements.
If you change your residence due to a permanent job transfer, you can deduct the reasonable unreimbursed costs related to relocating yourself and your family members.
Anyone living in your household is classified as someone who has both a former and new residence, though not including any tenants or employees unless you can vouch for them on your income tax return.
When calculating your taxes as a taxpayer, you can take advantage of federal tax cuts for the costs associated with transporting and relocating your home goods to a new residence. This includes expenses related to hauling trailers, packing inventory, storing items in transit, and additional insurance coverage.
Unfortunately, expenses incurred from purchasing furniture or other objects during the move cannot be deducted.
For the 30 days following your transition from one home to another, you can only factor in the costs associated with storing and insuring your personal belongings.
You can also decrease the amount of money you have to pay in taxes by writing off the cost of traveling from your old home to your new home. This includes airfare and car travel expenses but not things like food.
How Do You Deduct Moving Expenses?
Once you’ve determined which expenses are eligible for a deduction, the next step is to figure out how to get your deductions.
Document Dates and Amounts
It’s important to keep all documents and receipts related to your move. This includes items like bills of lading, invoices from movers, storage fees, and transportation costs.
For the IRS to process your deductions accurately, you should keep a detailed list of those expenses along with their associated dates and amounts. If you drove during your move, you must have a record of the miles driven and the amount of gas purchased.
Fill Out Tax Forms
You’ll also need to complete Form 3903 with your annual tax return to take advantage of the moving expense deduction. Line 1 of this form requires all eligible expenses incurred during your move and information about the distance from your old home to your new home.
This is where you need to enter the amount you paid for packing, crating, and moving your personal effects and household goods. You can also include any costs related to storage and insurance of all items above over a consecutive 30-day period when transitioning from one home to another.
If you’re moving abroad, include the costs for packing, crating, transporting, and insuring your household goods and personal items on this form.
Additionally, account for any expenses incurred from transferring these belongings between storage spaces or storing them when your new workplace is still considered your main place of employment.
Accurately fill out line 1 of the form with only your actual expenses. Exclude any moving costs for services reimbursed through a government allowance and those you don’t have to list as taxable income on this document.
To complete Line 2, enter the total sum you spent on transportation and lodging while traveling from your original residence to your new one. This encompasses expenses incurred only during arrival day.
All members of your household do not have to travel at once or together; nevertheless, each individual’s journey must be accounted for separately — no house-hunting expenditures should be included here.
Next, enter the total sum of reimbursements and allowances that the government granted you for expenses stated on lines 1 and 2. Exclude any value associated with storage services or a moving company provided to you by the federal institution.
Furthermore, do not include any allowances that are part of a dislocation, temporary lodging, or move-in housing when calculating this amount; these should be identified in box 12 (and code P) of your W-2 form.
Meet Time and Distance Requirements
To take advantage of the relocation deduction you must meet specific time and distance requirements to take advantage of the relocation deduction. For example, you must have worked full-time for at least 39 weeks within 12 months of your move or in a 24-month period that includes the move date; if self-employed, you must work 78 weeks during these periods.
The distance between your new home and your old one must exceed 50 miles more than the distance between your old workplace and your old home.
For instance, if you used to live four miles away from work, the distance between your new residence and your previous one must be at least 54 miles for this standard deduction to apply.
The Bottom Line
Moving is a costly enterprise, but with careful planning, you can take advantage of deductions to ease the financial burden. As long as you meet the time and distance requirements and keep records of all associated expenses, you should be able to get your deductions approved.
If you prefer to simplify your move, take advantage of Carvaygo’s moving services — we will ship your car to your new address so that you can focus on the rest of the move. With our reliable services, you’ll be able to relax and enjoy your new home in no time.
Sources:
Instructions for Form 3903 (2022) | Internal Revenue Service
IRS Form 3903: Are Moving Expenses Tax Deductible? | TurboTax Tax Tips & Videos
About Form 3903, Moving Expenses | Internal Revenue Service
