There are three certainties in life: death, taxes and change. In my 48 years in the tax industry, I've moved many times-- including a stint in Canada, where I launched Liberty Tax Service. Relocating is a given for many entrepreneurs and executives due to moving a business or a job change.
If you are one of them, you may be able to deduct your moving expenses, except for meals. To take the deductions and keep the IRS happy, your move must meet three requirements:
1. Closely related in time. Generally, you can consider moving expenses within one year-- before or after-- of the date you start work at a new job location. If you don't move within a year of that start date you can't deduct the expenses, unless you can show that your circumstances prevented the move. For example, if you delayed your family's move for 18 months to allow your child to complete high school, you can deduct your moving expenses. Check with a tax advisor to make sure you are following the rules
2. The distance test. Your new main job location must be at least 50 miles distant from your old home to your previous job. For example, if your previous job was 3 miles from your old home, your new job must be at least 53 miles from your old home.
3. Another test of time. After the move, you need to work full-time at your new job for at least 39 weeks out of the first 52 weeks. If you're self-employed, you have to meet this test and work full-time for a total of at least 78 weeks during the first two years at your new job site.
Another important note-- if your income tax return is due before you've met this test, you can still deduct moving expenses if you expect to meet it. The IRS has put together a list of dos and don'ts on moving expenses called Publication 521.
Along with the three main requirements, here are a few additional tips to help you save money.
- Travel Deductions. You can deduct transportation and lodging expenses for you and and your family (they have to be household members) while moving from your old home to your new home. The bad news is that you can't deduct your travel meal costs.
- Household goods and utilities. You can deduct the cost of packing, crating and shipping your stuff. You may also be able to include the cost of storing and insuring these items while you're moving. Many people also don't realize they can deduct the cost of connecting or disconnecting utilities. Small savings add up.
Importantly, you can't deduct as moving expenses any part of the purchase price of your new home, the cost of selling your home or the cost of entering into or breaking a lease. Also, if your employer later pays you for the cost of a move that you deducted on your tax return, plan to include that payment as income in the year you receive it. Don't try double dipping with the IRS.
Two More Items for Your Moving To-Do List
1. Address Change. When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address. Doing this early saves potential confusion down the road.
2. Remember Obamacare: Changes in Circumstances. If you or anyone in your family purchased health coverage through the Marketplace and had advance payments of the premium tax credit paid in advance to your insurance company to lower your monthly premiums, it is important to report life changes to the Marketplace when they happen. Moving to a new address is one change you should report.
Other things to report include changes in your income, employment, family size, and gaining or losing eligibility for other coverage. Reporting life changes as they happen allows the Marketplace to adjust your advance credit payments. This matters because it will help you avoid a smaller refund or unexpectedly owing taxes when you file your tax return.
If you are currently in a job-searching phase-- and hope that someday the above will apply to you-- check out my additional tips for you.
Most importantly, enjoy this journey.