Wait, the law has changedThis article refers to rules for 2017. Check our breakdown of the new tax rules and what they mean for you in 2018.
About 11% of Americans moved last year, according to the U.S. Census — and that can involve a lot of financial heavy lifting. Moving for better weather won’t score you a tax break. But if you’re doing it for work, you might be able to unpack some savings.
Use it or lose it (you, too, grads)
In most cases, you can only deduct moving expenses rung up within a year of starting a job.
Paul Rudoy, a CPA and managing partner at H2R CPA in Pittsburgh, said recent graduates often overlook the deduction when they get their first jobs and move away from home or school.
“That just isn’t top of mind,” he says.
Special rules apply to members of the military, people moving to the U.S. from abroad and people who are transferred or laid off, so check the IRS website for details.
Move far enough away
“If you’re trying to move a little closer to work, or you get a new job that’s really in the same town, but moving to another part of town gets you closer to that job, that’s probably not going to work,” says Tim Montgomery, a CPA in Murfreesboro, Tennessee.
To deduct moving expenses, your new job must be at least 50 miles farther away from your old house than your old job was, according to IRS rules. For example, if you quit a job that was three miles from your old house, your new job must be at least 53 miles from your old house for your moving expenses to be deductible. Moving farther away from a new job won’t get you a deduction either, unless you prove you’ll save time or money commuting, or that your employer requires you to live in the new house.
You’ll need to work full time for at least 39 weeks during the first year after a move in order to deduct your moving expenses. You don’t have to work for the same company all 39 weeks, and the weeks need not be consecutive — but you do have to work in the same general commuting area, according to the IRS.
If you move and write off your expenses, but then decide you hate the place and move back right away, you’ll need to unwind the deduction. That could mean amending your tax return, Montgomery warns.
If you’re a business owner, get those doors open
If you’re self-employed, you must work full time for at least 39 weeks during the first year after your move and at least 78 weeks in the first two years after your move to qualify for the deduction. You don’t have to be self-employed for all of those weeks, though — you could have a regular job and then start your business. And you can claim the deduction in the first year, while you’re working to meet the 78-week test, according to the IRS.
Don’t overdo it
Lots of moving expenses are deductible, so keep those receipts and see IRS Publication 521 for details. The cost of hiring movers is an obvious write-off, and the cost of transporting yourself to the new house can also be deductible. That includes expenses such as mileage, if you’re driving your car to the new house, and hotel bills if you have to stop along the way. Utility hookups, special transportation for pets and even some storage costs count, too.
But don’t get crazy. Closing costs, new license plates, home improvements, house-hunting expenses, losses on the sale of your home and security deposits are just a few of the no-nos the IRS says you can’t deduct.
Tina Orem is a staff writer at NerdWallet, a personal finance website. Email: [email protected].