The Internal Revenue Service (IRS) keeps a close eye on those who desire to deduct moving expenses on tax returns. Below is a brief explanation of what is stated in the Publication 521.
You must meet the following criteria if you wish to deduct your moving expenses:
1: The move must be related to the start of work.
2: You must meet a distance test.
3: You must meet a time test.
The move must be related to the start of work
The move must be related both in time and in location to where you start working.
In simple terms, being related to time is referring to your move being within one year of the date that you actually started work at a new physical place. This does not mean that you have to go to make arrangements to work before you move.
Note: You will likely not be allowed to deduct moving expenses if you did not move within the one year period that you started work at a new location without good reason.
In simple terms for being related to the location, your new job must be closer to your new house than your old house was from your old place of employment. There is still a chance that you can deduct moving expenses if there is a particular reason dealing with the employer or if your commute is shorter or less expensive from your new home to your place of employment.
One quick note, home is considered to be a primary residence. It can be virtually anything, including a houseboat, trailer, apartment, house, etc. Summer homes or homes owned by someone else are not eligible for moving expense deductions.
The move must pass the "Distance Test"
The new job location must be 50 miles farther from your old home than was your previous place of employment. For example, if your old job was 5 miles from your home, your new job must have been at least 55 miles from your old home to deduct moving expenses. A quick note, you should always use the shortest route when calculating the distance.
How to figure if you meet this:
1: How many miles was it from your old home to your new job location?
2: How many miles was it from your old home to your old job location?
3: Use this: #1 - #2 = ?
If you have an answer above 50 then you will meet the Distance Test requirement.Please note that your main job location is a reference to your primary workplace. This would be considered to be the place where you work most often and most of your hours each week.
The move must pass a "Time Test"
Moving expenses may only be deducted if an employee meets the time test, or if a self-employed person meets the time test.
Employees Time Test
This is also referred to as the 39-week test. Being an employee, you must work a minimum of 40 hours per week for a minimum of 39 weeks within the first 12 months that you arrive at your new location.
1: You may only count the time spent while being an employee, no self-employment hours can be counted.
2: You are not required to work for the same employer.
3: The 39 weeks do not have to be concurrent with one another.
4: The 39 weeks must be spent at an employer that is in the same general area.
Self-Employed Time Test
To meet the self-employed time test, you are required to work a minimum of 40 hours per week for 39 weeks within the first 12 months that you arrive at the new location. You are also required to meet work at least 40 hours per week for 78 weeks within the first 24 months that you arrive at the new location.
If you are confused about whether you might be eligible, it's recommended that you hold on to any receipts and go see a tax accountant. They help determine whether you are eligible. Also, the IRS website may help you as well.Written by Margarita Hakobyan
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