Moving Tax Deductions: Qualifying

Moving is an experience most people dread. Not only is it stressful, its expenses often run in the thousands of dollars. One silver lining is that those moving expenses are often tax-deductible. This article details the IRS guidelines on tax deductions for moving. IMPORTANT NOTE: These are guidelines based on material published by the Internal Revenue Service.

This topic will be divided into two posts:

• Today's post will focus on whether you (and your move) qualify to get any tax deductions
• Tomorrow's post will focus on what kind of moving expenses are tax-deductible.

Qualifying for the Deduction

There are two basic ways to qualify for moving-related deductions:

• Passing two IRS requirements for moving deductibility because of your job: the distance test and the time test
• Qualifying under special circumstances

You will have to meet all the requirements under one of these two methods for any of your expenses to qualify.

The Distance Test

The IRS wants to determine that your new job is more than 50 miles further from your old house than your old job was from your old house.

Sound complicated?

It isn't once you get familiar with it. Let's break it down to make it easier. There are only four numbers involved.

First, calculate how far your old job was from your old house. Let's say that was 10 miles. We'll call this the "old house, old job distance."

Next, calculate how far your new job is from your old house. We'll say that this distance is 75 miles. We'll call this the "old house, new job distance."

Third, we need to subtract the "old house, old job distance" (10 miles) from the "old house, new job distance" (75 miles). That difference is 65 miles (75- 10 = 65). We'll call this the "old job vs. new job distance."

There's only one step left. If your "old job vs. new job distance" is greater than 50 miles, you pass the distance test! If it's less than 50 miles, I'm afraid your move doesn't qualify.

The Time Test

Fortunately, the time test is a bit easier. If you spend 39 weeks out of the first 52 weeks at your new job as a full-time employee, you pass. If you're self-employed, you need to spend 78 weeks out of the first 2 years at your new job. Again, as long as you meet this standard, you pass the test.

Special Circumstances

While there are many special circumstances that can affect your eligibility, I'll just mention 3:

• Armed Forces. If you are in the Armed Forces and you moved because of a permanent change of station, you do not have to meet the distance test. See Members of the Armed Forces, later.
• Main job location. Your main job location is usually the place where you spend most of your working time. This could be your office, plant, store, shop, or other location. If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work.
• Union members. If you work for several employers on a short-term basis and you get work under a union hall system (such as a construction or building trades worker), your main job location is the union hall.

Next time we'll go over which moving expenses may be tax-deductible.