The moving expense deduction is only available when relocating to a new area that you intend to work in, whether through employment or self-employment. If you're married and file taxes jointly with your spouse, you may get to include both of your expenses if you move together. The moving expense deduction has two principal requirements -- the time and distance tests -- that you, or even your spouse, must satisfy.
Satisfying the Time Test
Starting with the day you arrive in the new location, you must be employed full-time for at least 39 weeks during the first 12 months. If you're self-employed, you'll also have to satisfy this 39-week requirement, but in addition, the cumulative number of weeks worked must total 78 or more within 24 months of the day you relocate. For example, if you're self-employed and work 48 weeks during the initial 12 months, you only need to work at least 30 weeks during the second 12-month period to satisfy the time test. Only one of you needs to satisfy this test, however. You can't combine the weeks you each work to reach 39 or 78. The Internal Revenue Service lets you take the deduction in the year you move as long as you anticipate being able to satisfy the time test in the future. In the event you take the deduction -- but don't work a sufficient number of weeks -- you must reverse the deduction on a future return by including in income the amount previously deducted.
Satisfying the Distance Test
To satisfy the moving expense deduction's distance test, your new work location -- not the location of your new home -- must be at least 50 miles further from your old home than your old work location was. For example, if your old work location was 10 miles from your old home, your new work location must be at least 60 miles from that home. If you or your spouse are enlisted in the armed forces and have a permanent change of station, you can report the moving expense deduction on your joint return without satisfying the distance or time test.
What You Can Deduct
Eligible moving expenses include the cost of packing, crating and transporting your furniture and other household items. They also include travel expenses for yourself, your spouse -- even if traveling separately -- and anyone else who moves with you. To claim other people's expenses, they must have lived in your former home and move with you into the new home, regardless of their ages, income levels or whether you can claim them as dependents or not. You can also deduct up to 30 days of storage unit rental fees. This might happen if your household items can't be delivered because you haven't secured housing in the new location yet. Travel expenses include the cost of hotels you stay in on the way to your new home, the actual cost of gas you purchase or the standard mileage rate for each mile you drive, parking charges, highway tolls and the price of airline and train tickets you purchase.
How to Prepare Your Form 3903
Deductible moving expenses must be reported on a Form 3903 attachment to your joint return. To take the deduction, you and your spouse must file Form 1040 -- you can't attach a 3903 form to the 1040A or 1040EZ. One of Form 3903's five lines is reserved for employer reimbursements. When an employer reimburses your moving expenses and doesn't treat the payment as taxable wages -- meaning it isn't reported on your W-2 or as income on your joint return -- you have to reduce the deduction by the reimbursed amount. Ultimately, the final moving expense deduction reported on Form 3903 is entered on the “Moving expenses” line of your return and reduces the joint adjusted gross income reported on it.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.