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Are Moving Expenses Tax Deductible? Your Complete Guide to Moving for Work

disability and taxes
Written by fritzie

Whether you’re moving to a nearby city or across the country, relocating isn’t cheap. Moving expenses can easily rack up thousands of dollars, depending on where you’re going and how you’re getting there. 

Good news: If you’re moving for work, you may be able to write off some of the costs. 

Here’s how to see if you qualify for a moving expense deduction:

When Are Moving Expenses Tax Deductible?

Not all costs of moving are deductible, nor will every moving situation qualify for a tax deduction.

To keep yourself out of legal hot water, put your unique situation to this three-part test:

Timing of the Move

If you relocate for work, it should be close to the time when you start your new job. 

Eligible moving expenses you incur within 12 months of the first day of your new job will qualify for a deduction. After that, you forfeit any right to claim a moving expense deduction.

Distance of the Move

Distance to work is the fourth biggest reason why people relocate. But simply having a long commute to your new job isn’t enough to deduct your move from your taxes. 

To qualify, your new job must add 50 miles one way to your commute if you were to remain in your current home.

For example, if you’re currently traveling 10 miles to work, your new job would need to be 60 miles or more away from your home.

If you had no job prior to your move, then your new job must be at least 50 miles from your current home to qualify for a deduction.

Time at the New Job

Once you move, you must commit to working full-time in your new area for at least 39 weeks of your first 12 months of employment.

This doesn’t mean you have to stay at your new job. You simply have to continue working in the general area where you relocated to. 

If you’re self-employed, this rule doubles. You must work full-time for at least 78 weeks during your first 24 months in your new area. 

Exceptions to the Three-Part Test

To qualify for a moving expense deduction, you’ll need to meet all three of the above parts. However, there are a few exceptions to this:

In relation to the time test, temporary absences still count as working full-time. These situations include strikes, illnesses, family deaths, layoffs, natural disasters, or similar circumstances. 

Seasonal work is also an exception to the time test. You’re still considered a full-time worker during the off-season provided it’s less than six months.

Members of the armed services do not have to meet the distance test if the move is related to a station change. 

Also, retirees may be able to write off relocation expenses, even though the move isn’t work-related. 

What Expenses Can I Write Off?

If you qualify for the moving expense deduction, don’t start celebrating just yet. Not all of the expenses you incur are tax-deductible, which means you’ll have to carefully separate them.

Here’s what you can legally write off:

Transportation

Any costs related to transportation are tax deductible. This includes a moving truck rental, gas, tolls, parking fees, and mileage on your personal vehicles.  

Moving Supplies

Moving requires tons of boxes, packing tape, bubble wrap, and other items to transport your belongings. All of these things can be deducted from your taxes. 

Lodging

If you’re moving to a new state, you may have to stop at a hotel overnight on your journey. Lodging can be deducted from your taxes, but forget about ordering room service. 

Moving Services

If you’re hiring a professional moving company to do your dirty work, save your receipt. Professional services are tax deductible, plus having one big expense can simplify your bookkeeping.

What Expenses Are Non-Deductible?

Common moving expenses that sound like logical deductions might not be valid. 

Meals, even for multi-day moves, are not eligible expenses. 

Any expenses associated with your new home, such as the purchase price, are not eligible for a deduction. The same goes for your old home, including any fees incurred by breaking a rental agreement. 

Also, any expenses that result in a reimbursement from your employer do not qualify. 

Be careful not to sneak in any ineligible expenses. The last thing you want is a potential IRS tax audit

What Proof Do I Need to Claim the Deduction?

As with any tax deduction, you’ll need to keep proof of how much you spent on moving. Save all moving-related receipts, credit card statements, and mileage logs so you can total your costs during tax season.

You won’t need to show proof of meeting the time, distance, and timing tests. However, it’s never a bad idea to keep an old bill with your former address on it to show how far you moved.

How Do I Claim the Deduction?

Claiming major tax deductions requires filing specific forms. In addition to your regular federal tax return, you’ll also need to fill out Form 3903. 

This form is fairly straightforward, especially since it helps you separate your eligible expenses by category. 

Line 1 is for all costs related to shipping and storage. Line 2 is the total amount of travel-related costs, including lodging and gas. Line 4 is for reimbursements for any moving expenses from your employer. 

If your total out-of-pocket costs were less than your reimbursement, you will not be able to write off any of your moving expenses. However, if your reimbursement didn’t cover all of your moving costs, then you can deduct the difference. 

This form is specifically related to moving costs. Use it to figure out your total eligible expenses, then document that amount on your Form 1040 as an income adjustment. 

How Much of My Moving Expenses Can I Write Off?

The IRS doesn’t specify a dollar limit for moving expenses. As long as you have documentation on how much your move cost you, you should be able to write off all eligible expenses.

Every Dollar Makes a Difference

It doesn’t matter what moving expenses you incur. Every dollar makes a difference, so never leave money on the table at tax time!

Moving can be a major hassle, but getting some of those expenses back into your pocket can make it a little more worth it.

Are you ready to file your taxes? Find out what other deductions you might have forgotten!

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fritzie

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