Relocation Tax Deduction
Americans are becoming increasingly mobile all the time. Strangely enough, the IRS seems to be encouraging this mobility as the relocation tax deduction is one of the most liberal of all deductions.
There was a time when people tended to stay in one place much longer and the retirement party where the worker was getting a gold watch for 50 years of service was not uncommon. Today, people seem to be much more mobile and job hopping is the norm. Since we tend to blame just about every other woe on the IRS, we can suggest that they might be the culprit here as well. The relocation tax deduction rules are some of the most liberal and surprising of all tax deductions.
The IRS allows a tax deduction for any moving and relocation expenses that are work related. The deduction is claimed on IRS Form 3903 and transferred directly to “Adjustments to Income” on the form 1040. Although you have to use the long form 1040, you are not required to itemize any other deductions. You do not have to file a Schedule A or worry about such things as percentage-of-income thresholds or deduction phase outs due to higher income levels.
The IRS imposes only two tests or rules to insure that you are legit in your move. The first is a distance requirement. The move has to involve a new work place that is at least 50 miles from your previous residence. Note that this requirement is measured from your new work office to your previous residence and not between the old and the new residence. The second rule is a time requirement. The move must be made within one year of starting the new job and you must actually work a total of 39 weeks during the first 12 months of your new employment. The weeks do not have to be consecutive.
The deduction covers the cost to move your household goods and your personal property. It also includes lodging and travel expenses. The lodging can be in the area of the old home before the move and in the area of the new home after the move. Travel expenses are included as is the cost of shipping a vehicle. They even will allow you to claim the cost of shipping a pet!
IRS Publication 521, Moving Expenses, gives all the details on relocation tax deductions. It is really a very liberal set of regulations that seems to almost encourage job mobility. One thing to remember, however, if your employer is paying any of these relocations expenses, you can not still deduct them from your taxes. If your expenses are ordinary and not excessive and exceed what your employer pays, the difference could be deducted.