The Internal Revenue Service allows taxpayers to deduct certain relocation related expenses from their gross income if they meet eligibility requirements. To take such a deduction, you must file your taxes with a Form 1040 and also submit Form 3903 to document your relocation expenses. You are only allowed to deduct necessary and reasonable expenses.
You need to meet three tests of eligibility to take tax deductions for your relocation expenses. First, your move to a new home must be job related. This includes a transfer by a current employer, a brand new job or even your very first job. Second, your new job location must be at least 50 miles from the home you are leaving. Lastly, you must spend a minimum time working in your new location. This requires full time work for at least 39 weeks within the 12 months following your relocation.
The IRS will allow you deductions for your travel expenses to your new location. This can be actual costs of public transportation, such as a train or airline ticket, or for the use of your car. Car expenses can be actual, logged costs for fuel and tolls or an allowance of 23 cents per mile. Family members can travel individually and still take the deduction. Cost for lodging, but not for food, is also deductible. You must travel in the most direct and reasonable fashion to your new location.
You can deduct expenses for moving company costs. This includes charges for the actual transport, reasonable insurance and packing and crating. You can also deduct costs for any necessary storage charges, up to a 30-day maximum. If you have a company separately transport your pets, this is also deductible. Costs for shipping your cars if you choose not to drive them are deductible. Any costs for disconnecting utilities at your old home or for hookup at your new home are also deductible.
You can only deduct necessary and reasonable expenses. For example, you can not deduct costs for any side trips or sightseeing trips on the way to your new home. Employer reimbursement for your relocation expenses cannot also be deducted from your taxes, unless the reimbursement is added to your taxable gross salary. You are allowed to take the deductions if you intend to fulfill the required 39 weeks of work in your new location. However, if you don't end up actually doing so, you may be liable to pay taxes on the deductions you already took.
Kerry Zias has been a strategic business consultant and college instructor of business administration courses since 1990. He has taught courses and performed professional consulting work in the areas of marketing, management, business start-ups, entrepreneurship, real estate, sales psychology and performance, business communications, business law and political/governmental relations. Zias holds a Master of Business Administration in marketing from National University.