Moving to a new home can be time-consuming, exhausting and expensive. However, many people don’t realize that when they relocate, they may be able to deduct their moving expenses on their tax return. Depending on how much your move cost, this deduction could spell significant savings.
It’s worth noting that this deduction isn’t available to everyone who chooses to uproot themselves. Your situation has to meet certain requirements. We provide the three-part litmus test for this deduction below:
Relationship between your move and your new job: The IRS wants to see that your job and your relocation are closely linked—both in terms of time and place. In order to satisfy this condition, you must meet two requirements:
- You must start working in the new geographic area within a fixed amount of time—usually one year—after moving there. It is not required for you to have the job offer before moving.
- You must demonstrate that your new home is geographically closer to your new job—or requires a shorter commute—than your previous home is to the same job.
Distance: The IRS puts a distance requirement on this deduction, which prevents you from deducting moving expenses if your move is within a small geographic area. To calculate whether you meet this requirement, use the following formula:
- Figure out the distance of the shortest possible route from your previous home to your current job.
- Subtract the distance of the shortest possible route from your previous home to your old job.
- If the difference is at least 50 miles, then you’ve satisfied the requirement for this category.
Time: The amount of time you work at your new job also factors into your eligibility for this deduction.
- If you’re an employee: After moving to your new location, you must work for at least 39 weeks in a full-time capacity during the first 12 months of your stay.
- If you’re self-employed: You must meet the same requirement as above and your must work for at least 78 weeks during the first 24 months after your arrival.
Significant changes in life circumstances can have dramatic implications on your taxes. It’s worth consulting with an experienced tax attorney to make sure you’re getting all of the deductions you deserve.