A penny saved is a penny earned – said a wise man once upon a time. If you have gone through a business relocation in the past year, then you may be able to save more than a few pennies. Did you know that a big portion of people who have moved for work can deduct moving expenses? More precisely, they can receive a tax return if and only if they meet certain criteria. We here at Tik Tok Moving and Storage Queens sat down and did the necessary research. Following are the guidelines to abide by when filing for a moving expenses deduction, as well as the requirements for getting one.
Moving cost deduction applies only if you moved for work
Whether you’ve moved alone or with a family doesn’t matter. What matters is that your residential NYC relocation was urged due to business purposes. Of course, you may have moved much farther than NYC, and we’ll get to that in a few short minutes. And now a piece of bad news – this practice seems to be temporarily aborted, but it is scheduled to come back into action any time now. Until then, it would be good to learn which requirements you have to fulfill in order to be able to deduct your moving expenses.
Not all expenses will be moving expenses
There is a whole list of things that are considered as a moving expense, as well as a list of those expenses that aren’t considered as it – it’s impossible to list them all. But, all expenses related to packing and shipping of your belongings, plane tickets, and travel expenses can be deducted. On the other hand, meals you and your family had during that time is not considered as a moving expense. When you take into account the cost of professional local or long distance movers, you’ll see that the rules are actually in your favor.
You can deduct moving expenses only if you satisfy different criteria
And now, brace yourselves – you might be left broken-hearted in case you realize you don’t satisfy all criteria. Before you start despairing, let us tell you right away that there are always exceptions to the rules. And we’ll get to them before you know it.
Test number 1: the ‘closely related to starting work’ test
The rules state that you can deduct moving expenses if you relocate within one year of reporting a new workplace. Let’s say you start working on your new job on January 1. You have an entire year, until the very last day of December to relocate and become eligible for a tax deduction. If you put it into perspective, one year really does give you enough time to get your affairs in order, relocate, and still deduct your moving expenses.
If you happen to be working outside the US, retire, and then come back to the states, you can still deduct your moving expenses. That’s a piece of great news for all of you who are considering to finally retire.
Test number 2: the distance test
The rules of the distance test might seem complicated at first. Once you take a second, closer look, you’ll realize that they actually make sense. In order to be eligible for a deduction, your new job must be at least 50 miles farther from your home than your old job was. That means that if the distance between your old job and house was 10 miles, the distance between your home and your new job must be at least 60 miles. And that means that your relocation would qualify as a long distance one, but not necessarily as an interstate move. Although, who knows.
If you are a member of the military, you become eligible for a tax deduction, even if you don’t satisfy the distance test. The only rule you have to satisfy is the one that states you need to be on active duty and relocate because you got a permanent change of station. It’s just the state’s way of showing they have a great appreciation for your valor.
Test number 3: the other time test
In order to satisfy the other time test, you can qualify in two ways. Of course, you don’t have to fulfill both of those requirements to pass – one is more than enough!
- You can pass the test by working as a full-time employee for at least 39 weeks in the first 12 months following your move.
- But, you can also pass by working full-time as a self-employed person for at least 39 weeks in the first 12 months following your move, as well as work at least 78 weeks in total in the first 24 months of your move.
The exceptions from the previous two rules apply to this one, as well. But there are three other exceptions to the other time test, and they might be of interest to you.
- If you are a spouse of a person who has worked abroad and relocated back after retirement, you are exempt from the rule.
- In case your new job ends due to an injury or disability, you don’t have to worry about the other time test.
- If you move because of your employer’s benefit or were fired due to any reason that is beyond your power, you are exempt from the rule.
The bottom line – should you attempt to deduct moving expenses?
As with all legalities, there are a million rules to satisfy in order to deduct moving expenses. If you think you might satisfy them, feel free to file for a tax deduction. You have nothing to lose – quite the contrary. You can only end up on the winning side of the situation.