Moving is expensive. Fortunately, if you have to move to a new location because of your job, your moving expenses are deductible as long as you pass the IRS distance and time tests. You are eligible for this deduction as long as your move is work-related--that is you found a new job, your current job requires the move, or it's your first job and you need to move.
Your first hurdle is to pass the distance test. To do this, the distance between your new job location and your former home must be at least 50 miles further than your old commute. That is, your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home. If you go back to full-time work after a substantial period of part-time work or unemployment, your place of work also must be at least 50 miles from your former home.
Example: Jane moves to a new home less than 50 miles from her former home because she changed jobs. Her old main job location was 3 miles from her former home. Her new main job location is 60 miles from that home. Because her new main job location is 57 miles farther from her former home than the distance from her former home to her old main job location, she meets the distance test.
You must also pass the time test. This means that if you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months immediately following your arrival in the general area of your new work location. There are exceptions to the time test in case of death, disability, and involuntary separation, among other things.
What You Can Deduct
If you meet these requirements, you can deduct the reasonable expenses of:
- moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and
- traveling (including lodging but not meals) to your new home.
You can travel by car, plane, or any other conventional means of transportation. However, you must take the shortest, most direct route available by conventional transportation. If during your trip to your new home, you stop over, or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses.
If you travel by car, you can deduct your gas and other car expenses. You can either deduct your actual expenses or take the standard mileage deduction of 55.5 cents per mile (in 2012). You can also deduct the costs of connecting or disconnecting utilities and shipping your car and your household pets to your new home.
You can also deduct the cost of storing and insuring your household goods and personal effects for up to 30 days after the day your things are moved from your former home and before they are delivered to your new home. However, you cannot deduct any moving expenses covered by reimbursements from your employer.
Moving expenses are figured on IRS Form 3903, Moving Expenses, and deducted as an adjustment to income on your Form 1040. This makes them a particularly attractive deduction because they are not a miscellaneous itemized deduction that must be listed on Schedule A and are not subject to the 2% of adjusted gross income limitation on such deductions (miscellaneous itemized deductions are deductible only if, and to the extent, they exceed 2% of AGI).