Moving expenses are deducted as an adjustment to income on Form 1040, but you cannot deduct any moving expenses covered by reimbursements from your employer that are excluded from income. If you meet the requirements of the tax law for the deduction of moving expenses, you can deduct the following types of moving expenses, as long as they are "reasonable":
- 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.
Note: The rules applicable to moving within or to the United States are different from the rules that apply to moves outside the United States. These rules are discussed separately.
Qualifying for Moving Expenses
If you moved due to a change in your job or business location, or because you started a new job or business, you may be able to deduct your reasonable moving expenses but not any expenses for meals. To qualify for the moving expense deduction, you must satisfy two tests. Under the first test, 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 second test is 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.
Note: 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".
What Are "Reasonable" Expenses?
You can deduct only those expenses that are reasonable under 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 make side trips for sight-seeing, the additional expenses for your side trips are not deductible as moving expenses.
Travel by Car - How to Calculate the Deduction
If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either:
- Your actual expenses, such as gas and oil for your car, if you keep an accurate record of each expense, or
- The standard mileage rate of 19 cents per mile for miles driven during the period from January 1 to June 30, 2011, and 23.5 cents per mile for miles driven during the period from July 1 to December 31, 2011. The rate for 2012 is 23 cents per mile.
Tip: If you choose the standard mileage rate you can deduct parking fees and tolls you pay in moving. You cannot deduct any general repairs, general maintenance, insurance, or depreciation for your car.
Member of Your Household
You can deduct moving expenses you pay for yourself and members of your household. A member of your household is anyone who has both your former and new home as his or her home. It does not include a tenant or employee, unless you can claim that person as a dependent.
Moves Within or to the United States
If you meet the requirements of the tax law for the deduction of moving expenses, you can deduct allowable expenses for a move to the area of a new main job location within the United States or its possessions. Your move may be from one United States location to another or from a foreign country to the United States.
Household goods and personal effects. You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home. If you use your own car to move your things, compute the deduction under the rule discussed above under "Travel By Car."
Tip: You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home.
You can deduct any costs of connecting or disconnecting utilities do the moving your household goods, appliances, or personal effects.
Tip: You can deduct the cost of shipping your car and your pets to your new home.
You can deduct the cost of moving your household goods and personal effects from a place other than your former home. Your deduction is limited to the amount it would have cost to move them from your former home.
Example: Paul Brown is a resident of North Carolina and has been working there for the last 4 years. Because of the small size of his apartment, he stored some of his furniture in Georgia with his parents. Paul got a job in Washington, DC. It cost him $300 to move his furniture from North Carolina to Washington and $1,100 to move his furniture from Georgia to Washington. If Paul shipped his furniture in Georgia from North Carolina (his former home), it would have cost $600. He can deduct only $600 of the $1,100 he paid. He can deduct $900 ($300 + $600).
Note: You cannot deduct the cost of moving furniture you buy on the way to your new home.
Travel expenses. You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. This includes expenses for the day you arrive. You can include any lodging expenses you had in the area of your former home within one day after you could not live in your former home because your furniture had been moved. You can deduct expenses for only one trip to your new home for yourself and members of your household. However, all of you do not have to travel together. If you use your own car, calculate your deduction as explained under Travel By Car, earlier.
Moves Outside the United States
To deduct allowable expenses for a move outside the United States, you must be a United States citizen or resident alien who moves to the area of a new place of work outside the United States or its possessions. You must meet the requirements of the tax law for deducting moving expenses.
In addition to the expenses discussed earlier, the following may be deductible for moves outside the United States.
Storage expenses. You can deduct the reasonable expenses of moving your personal effects to and from storage. You can also deduct the reasonable expenses of storing your personal effects for all or part of the time the new job location remains your main job location. The new job location must be outside the United States.
Moving expenses allocable to excluded foreign income. If you live and work outside the United States, you may be able to exclude from income part of the income you earn in the foreign country. You may also be able to claim a foreign housing exclusion or deduction. If you claim the foreign earned income or foreign housing exclusions, you cannot deduct the part of your allowable moving expenses that relates to the excluded income.