Determining what moving expenses may be tax deductible
Transferees who are moving through a domestic relocation program and have expenses that are not covered by their employer may be eligible for tax deductions, making the transfer much less expensive in the long run.
The Internal Revenue Service explains that many moving expenses can be deducted, but it is important to note that items like meals will not be able to have the same treatment. For moving expenses to be deductible, the new employment location must be 50 miles farther away from your former home than your previous place of work was. Those who are entering into their first employment situation need to have a new job 50 miles or more from their previous home. Additionally, transferees must have official full-time status for 39 weeks of the first year at the new location. Those who do not meet this requirement must have a specific reason that is acceptable to the IRS, including disability, separation and death.
The expense of packing and shipping belongings, including household goods, car or family pet, can be deducted. In addition, any costs for moving appliances or connecting utilities can be deducted from your taxes. Storage expenses for a foreign move are also deductible. Even expenses for items shipped later can be deducted based on how much it would have cost to move them from the former home.
The IRS calculates all moving deductions using Form 3903, which then feeds into an employee's normal 1040 tax form.
It is important for companies and transferees to keep in mind that any deducted expenses are invalid if the company reimburses the transferee or directly pays the expense on behalf of the transferee.
The company’s relocation policy will explain the expenses covered through the relocation program. In some cases, expenses are specifically not covered by the company due to the tax advantage its deductibility provides. An end-of-year accounting of reimbursed relocation expenses is helpful tool in determining expenses that can be tax deductible.
Filed under: Domestic Relocation Services