Moving Expenses to and from the United States
If you moved to a new home because of your job or business, you may be able to deduct the expenses of your move. To be deductible, the moving expenses must have been paid or incurred in connection with starting work at a new job location. Moving expenses are discussed in detail in Publication 521, Moving Expenses. However, there are various rules that apply specifically to moves to or from a foreign country. Those rules are mentioned here.
Moves to Locations in the United States
If you meet the Who Can Deduct Moving Expenses requirements in Publication 521, you can deduct expenses for a move to the area of a new main job location within the United States or its possessions. Your move may be from one U.S. location to another or from a foreign country to the United States.
Retirees or survivors who move to the United States. If you are a retiree who was working abroad, or a survivor of a decedent who was working abroad, and you move to the United States or one of its possessions, you do not have to meet the time test discussed in Publication 521. However, you must meet the requirements discussed below under Retirees who were working abroad or Survivors of decedents who were working abroad.
Retirees who were working abroad. You can deduct moving expenses for a move to a new home in the United States when you permanently retire. However, both your former main job location and your former home must have been outside the United States.
Permanently retired. You are considered permanently retired when you cease gainful full-time employment or self-employment. If, at the time you retire, you intend your retirement to be permanent, you will be considered retired even though you later return to work. Your intention to retire permanently may be determined by:
Your age and health,
The customary retirement age for people who do similar work,
Whether you receive retirement payments from a pension or retirement fund, and
The length of time before you return to full-time work.
Survivors of decedents who were working abroad. If you are the spouse or the dependent of a person whose main job location at the time of death was outside the United States, you can deduct moving expenses if the following five requirements are met.
The move is to a home in the United States,
The move begins within 6 months after the decedent's death ("when a move begins" is described below),
The move is from the decedent's former home,
The decedent's former home was outside the United States, and
The decedent's former home was also your home.
When a move begins. A move begins when one of the following events occurs.
- You contract for your household goods and personal effects to be moved to your home in the United States, but only if the move is completed within a reasonable time.
- Your household goods and personal effects are packed and on the way to your home in the United States.
- You leave your former home to travel to your new home in the United States.
CAUTION! If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction for that move.
Moves to Locations Outside the United States
Foreign Moves. A foreign move is a move in connection with the start of work at a new job location outside the United States and its possessions. A foreign move does not include a move back to the United States or its possessions.
Allocation of Moving Expenses
When your new place of work is in a foreign country, your moving expenses are directly connected with the income earned in that foreign country. If all or part of the income that you earn at the new location is excluded under the foreign earned income exclusion or the housing exclusion, the part of your moving expense that is allocable to the excluded income is not deductible.
If your new place of work is in the United States, the deductible moving expenses are directly connected with the income earned in the United States. If you treat a reimbursement from your employer as foreign earned income, you must allocate deductible moving expenses to foreign earned income.
For an explanation and example of how the allocation is done, refer to Moving Expenses in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Tax Withholding and Estimated Tax
Your employer must withhold income tax, social security tax, and Medicare tax from reimbursements and allowances paid to you that are included in your income. See Reimbursements Included in Income below.
Reimbursements Included in Income. Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even though they are for deductible moving expenses. See Publication 521. Your employer also must include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. This includes amounts your employer reimbursed you under an accountable plan (explained in Publication 521) for meals, house hunting trips, and real estate expenses. It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer.
Reimbursements Excluded from Income. Your employer should not include in your wages reimbursements paid under an accountable plan for moving expenses that you:
Could deduct if you had paid or incurred them, and
Did not deduct in an earlier year.
These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. Your employer should report these reimbursements in box 12 of Form W–2.
Estimated tax. If you must make estimated tax payments, you need to take into account any taxable reimbursements and deductible moving expenses in figuring your estimated tax. For details about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax.
CAUTION! You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income. In addition, you cannot claim a moving expense deduction for a move from the United States to a foreign country if after you leave the United States you will become a nonresident alien and your future income in the foreign country will not be subject to U.S. taxation.