Making a big move for a great new job can be a costly undertaking. Even when an employer covers part of the expense, it's likely movers will still go in the hole a bit. Fortunately, the IRS allows deductions for moves that relate to employment. Learning how and when to take these deductions is a very smart thing to do before packing up and heading out of town.
Deductions for moving expenses are allowed by the IRS when three conditions are met. They hinge on the distance of the move, the time on the job and the timeframe of the move in regard to starting the new position. If these conditions are met, many costs related to moving are tax deductible.
To get started, the first thing a person moving needs to do is keep track of expenses and hang on to receipts following a move. Movers should hang on to mileage reports or gas and oil receipts, hotel bills, moving company bills and even storage fee receipts.
When all the receipts are together, the standard way to report moving expenses is using IRS Form 3903. This form is not always necessary to use, however. Those who have moved to a location outside the U.S. in a year prior to the claim, those who are only claiming storage expenses while they are outside the U.S. and those who receive employer reimbursements might not need this form. More information on who needs to file form 3903 is available in Publication 521: Moving Expenses
When Form 3903 is needed, it is important that qualified movers fill it out thoroughly and with attention to detail and accuracy. Doing this can help make sure the deduction bottom line reflects all the expenses it should.
Choosing when to take the deduction for moving expenses is generally the next concern. If expenses are not reimbursed by an employer, you can take the deductions the year the expenses were incurred. If an employer covers the cost, you can deduct expenses either in the year they were paid or in the year the reimbursement was received.
In reimbursement cases, the additional expenses not covered by the employer are where the deductions come in. If reimbursement is not counted in income, however, no deductions apply typically.
Getting a tax break to help cover moving costs is a good thing. Filling out the form incorrectly or doing it at an inappropriate time is not. The general rule of thumb to follow is that expenses can be deducted the year they are incurred if an employer isn't helping foot the bill. Or, they can be deducted before or after a reimbursement is issued if that reimbursement is counted as income.
More Information in the Movers' Tax Guide
Special Movers' Tax Guide Note
Our Movers' Tax Guide is intended to provide you with helpful information on who quailifies to deduct moving expenses, which expenses are deductible and how to claim these deductions. For further clarification, movers are encouraged to seek additional information from the US Internal Revenue Service and/or to consult with their tax professional.
