By Peter Jason Riley
Major changes in the tax rules significantly affect a deduction used by many individuals: the deduction for expenses of job-related moves. If you've moved before, some of the requirements will be familiar but many will not. For instance, house-hunting expenses, temporary living expenses and certain real estate expenses used to be deductible. Now only two categories of moving expenses are deductible; transporting expenses and traveling expenses. On the upside, however, more people will benefit from the deduction because it's available even to those who take the standard deduction. Also, the expenses you can take are no longer subject to dollar limitations.
How do you qualify now? Essentially, you can deduct moving expenses paid or incurred during the tax year in connection with the start of work at a new principal place of work if distance and time-of-employment requirements are met. This means that an employee can deduct qualifying moving expenses only if the new place of work is at least 50 miles farther from the old home than the old place of work was from the old home and if the employee works full time at the new job location for at least 39 weeks during the first 12 months after the move. Self-employeds must meet the same distance test as employees and additionally must work full time at the new job location for at least 78 weeks during the first 24 months after the move. Once you meet these tests you can deduct the expenses of transporting household furnishings and personal belongings to the new residence, and transportation expenses, including lodging, but not meals, incurred while traveling to the new place of residence.
It's also worth mentioning the complications that occur when only one spouse begins work in a new location, but both spouses relocate. When a husband and wife move but only one of them begins work in the new location and a joint return is filed, the moving expenses paid by either spouse that are attributable to the move of the working spouse, the nonworking spouse, or other members of the working spouse's household can be deducted. Married couples that make a job-related move should note that if they file separate returns for the year that the moving expenses are incurred, the working spouse may deduct only so much of the moving expenses that he or she pays. Also important is the fact that the nonworking spouse involved in a job-related move is not entitled to a deduction for moving expenses paid by him or her on a separate return. Moving expenses may be a factor for married couples in deciding whether to file joint or separate tax returns.
Please call us if you are not clear about what qualifies as a deductible moving expense, whether the time and distance requirements have been met or if you need information about what to do if your employer pays the relocation costs.