Deductibility of Moving Expense

By Peter Jason Riley

There are some general and some specific requirements that you must satisfy in order to qualify for the moving expense deduction.

In General

The Internal Revenue Code [§217] allows individuals to deduct reasonable moving expenses paid or incurred during the taxable year in connection with the commencement of work at a new principal place of work. Moving expenses incurred that are not paid or reimbursed by your employer are allowable as a deduction in computing adjusted gross income and are not subject to the 2% floor limitation on itemized deductions. You must be able to substantiate all deducted expenses, so be certain to keep adequate records, receipts, and canceled checks. The specific requirements that you must satisfy to qualify for this deduction are discussed below.

Closely related to start of work

Deductible moving expenses must be closely related in time and place to the commencement of work at a new location. The requirement that the move be closely related in time is satisfied if the expenses deducted are incurred within one year of the date you report to the new job. The requirement that the move be closely related in place is satisfied if the distance from your new home to your new job is less than the distance from your former (i.e., current) home to the new job. Please note, however, that even if these requirements are met, you must still satisfy the distance and duration requirements discussed below.

Distance requirement

In order for moving expenses to be deductible, your new job must be at least 50 miles farther from your old residence than was your former job. I understand that you are a salesman, and that the new job will require that you be on the road daily meeting with customers in an assigned region. In your case, the "job location" that applies to this requirement is your main job location, e.g., the place where you report for work, where you base your work, or where you spend most of your working time.

Duration of employment

The moving expense deduction is also conditioned upon you remaining a full-time employee for at least 39 weeks during the 12-month period right after you move. You have explained to me that, as a traveling salesman, work is slow for 2-3 months in the winter because of the holidays, the seasonal decrease in home-building, and also because traveling is more difficult. In order to meet the duration requirement, you should know that you need not work 39 consecutive weeks, and also that employees in a seasonal trade or business are considered to be working full-time if the off-season is less than six months and the employee works full-time before and after the off-season. Since you and your spouse file a joint return and since you are both employed, if both of you change jobs, either of you can satisfy the full-time work test, but you cannot add the weeks your spouse works to those you work.

You may generally claim the moving expense deduction in the year in which the expenses are incurred, even if you have not satisfied the duration requirement by the deadline for filing your return, as long as there is time in the 12-month period to satisfy the requirement. For example, assume you begin your new employment in December 2000 and pay your moving expenses in 2000. On April 16, 2001, when you file your income tax return for 2000, it will not be necessary for you to have met the 39-week requirement. You, however, may elect to claim the 2000 moving expenses on your 2000 income tax return in any case, as there is still sufficient time remaining before December 2001 to satisfy such condition. Alternatively, if you incurred the expenses in 2000, but decided to claim the deduction in 2001 after satisfying the duration test, you must file an amended return for 2000 to take the deduction.

Moving Expenses Defined

Moving expenses paid or incurred are limited in scope. Moving expenses means only the reasonable expenses of (1) moving household goods and personal effects from your former residence to the new residence, and (2) traveling (including lodging, but not meals) from the former residence to the new place of residence. You are allowed to take into account another person's (i.e. your spouse) moving expenses when that person has both the former residence and the new residence as their principal place of abode and is a member of your household.

Specific types of deductible expenses for moving "household goods and personal effects" include: packing and crating charges; the costs of connecting or disconnecting utilities; and the in-transit storage charges (within any consecutive 30-day period after your things are moved from your former home and before they are delivered to your new home) and insurance for the household goods and personal effects you or a member of your household own. Also included are costs associated with moving your car for use at the new home, and the reasonable costs of moving your pets. You may also deduct the cost of one trip for you, Jim, and the members of your household from your former home to your new home, including travel and lodging. If you use your automobile to travel to your new home, you may deduct either the actual out-of-pocket expenses for which you have adequate records, or you may take the standard mileage deduction if you can prove the mileage traveled.

Moving expenses that are not deductible include the cost of: househunting trips; living expenses after you arrive at the new location; trips to sell property; storage other than in-transit storage; mortgage penalties; loss on the sale of your home, etc. Also not allowed are pre-departure expenses at the former residence, any allowance for depreciation, or expenses of trips back to the former residence because family members are still there.