We are nearing the end of tax year 2005 and this would be a good time to remind you that moving expenses can be a tax deduction. If it is tax deductible, the deduction is taken on page 1 of the 1040 to arrive at the Adjusted Gross Income (AGI), which means that you do not have to file a Schedule A, you do not need to itemize your deductions.
The Distance and Time Tests
To determine if your moving expenses are deductible, you must pass two tests:
The first test is the distance test: The new job location must be at least 50 miles farther from your former home than was the former principal place of work. If you did not have a former principal place of work, the distance to the new principal place of work must be at least 50 miles from the former residence.
This last situation applies to recent school graduates.
The second test is the time test. If you are an employee, you must be full-time for at least 39 weeks during the immediate 12-month period after arriving in the general area of the new job location. If you are self-employed, the test covers the 39-week test during the immediate 12-month period and also you must work for 78 weeks during the immediate 24-month period after arriving in the general area of the new work location. If you are married, either spouse may meet the 39 or the 78-week test.
What types of expenses are deductible?
Direct moving expenses are deductible. Direct moving expenses include the costs of moving the taxpayer and household members and their household goods, pets, automobiles, and personal effects from the former residence to the new residence. Direct expenses also include connecting or disconnecting utility services, packing, crating, insurance costs, and in-transit storage of up to 30 days.
Nondeductible Expenses
The following items are not deductible as moving expenses: Any part of the purchase price of your new home, car tags, driver's license, expenses of buying or selling a home, expenses of getting or breaking a lease, home improvements to help sell your home, loss on the sale of your home, losses from disposing of memberships in clubs, meal expenses, mortgage penalties, pre-move house hunting expenses, real estate taxes, refitting of carpets and draperies, security deposits (including any given up due to the move), storage charges except those incurred in transit and for foreign moves, and temporary living expenses.
Another Deduction
Mileage is also deductible. The mileage is deductible at 15 cents/mile for January 01, 2005 - August 31, 2005.- From September 01, 2005 until December 31, 2005, the mileage is deductible at 22 cents/mile.
What about moving expense reimbursements?
If your employer reimburses you for your moving expenses, you will not get to deduct the expenses, but here is the great news: your reimbursement is not taxable. It is excluded from gross income. It is reported on the W-2, but not as taxable income.
Moving expenses are also allowed when moving from a foreign country to the United States.
There are special rules for military and there is sometimes choice into which year the moving expenses fall. We can help you with all of these situations. Please let us know your situation.
