Table of Contents
You can deduct your moving expenses if you meet all three of the following requirements.
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Your move is closely related to the start of work.
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You meet the distance test.
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You meet the time test.
After you have read these rules, you may want to use Figure B to help you decide if you can deduct your moving expenses.
Your move must be closely related, both in time and in place, to the start of work at your new job location.
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You are required to live at your new home as a condition of your employment, or
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You will spend less time or money commuting from your new home to your new job location.
Your move will meet the distance test if your new main job location is at least 50 miles farther from your former home than your old main job location was from your former home. For example, if your old main job location was 3 miles from your former home, your new main job location must be at least 53 miles from that former home. You can use Worksheet 1 to see if you meet this test.
The distance between a job location and your home is the shortest of the more commonly traveled routes between them. The distance test considers only the location of your former home. It does not take into account the location of your new home. See Figure A, below.
Worksheet 1. Distance Test
| Note. Members of the Armed Forces may not have to meet this test. See Members of the Armed Forces. | |||
| 1. | Enter the number of miles from your old home to your new workplace | 1. | miles |
| 2. | Enter the number of miles from your old home to your old workplace | 2. | miles |
| 3. | Subtract line 2 from line 1. If zero or less, enter -0- | 3. | miles |
| 4. |
Is line 3 at least 50 miles?
□ Yes. You meet this test. □ No. You do not meet this test. You cannot deduct your moving expenses. |
||
Example.
You moved to a new home less than 50 miles from your former home because you changed main job locations. Your old main job location was 3 miles from your former home. Your new main job location is 60 miles from that home. Because your new main job location is 57 miles farther from your former home than the distance from your former home to your old main job location, you meet the distance test.
Figure A
To deduct your moving expenses, you also must meet one of the following two time tests.
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The time test for employees.
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The time test for self-employed persons.
Both of these tests are explained below. See Table 1, below, for a summary of these tests.
You can deduct your moving expenses before you meet either of the time tests. SeeTime Test Not Yet Met, later.
If you are an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location (39-week test). Full-time employment depends on what is usual for your type of work in your area.
For purposes of this test, the following four rules apply.
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You count only your full-time work as an employee, not any work you do as a self-employed person.
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You do not have to work for the same employer for all 39 weeks.
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You do not have to work 39 weeks in a row.
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You must work full time within the same general commuting area for all 39 weeks.
If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive in the general area of your new job location (78-week test).
For purposes of the time test for self-employed persons, the following three rules apply.
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You count any full-time work you do either as an employee or as a self-employed person.
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You do not have to work for the same employer or be self-employed in the same trade or business for the 78 weeks.
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You must work within the same general commuting area for all 78 weeks.
| Table 1.Satisfying the Time Test for Employees and Self-Employed Persons |
| IF you are... | THEN you satisfy the time test by meeting the... |
|---|---|
| an employee | 39-week test for employees. |
| self-employed | 78-week test for self-employed persons. |
| both self-employed and an employee at the same time |
78-week test for a self-employed person or the 39-week
test for an employee. Your principal place of work determines which test applies. |
| both self-employed and an employee, but unable to satisfy the 39-week test for employees | 78-week test for self-employed persons. |
Example.
You own and operate a motel at a beach resort. The motel is closed for 5 months during the off-season. You work full time as the operator of the motel before and after the off-season. You are considered self-employed on a full-time basis during the weeks of the off-season.
Example.
Justin quit his job and moved from the east coast to the west coast to begin a full-time job as a cabinet-maker for C and L Cabinet Shop. He generally worked at the shop about 40 hours each week. Shortly after the move, Justin also began operating a cabinet-installation business from his home for several hours each afternoon and all day on weekends. Because Justin's principal place of business is the cabinet shop, he can satisfy the time test by meeting the 39-week test.
If you are married, file a joint return, and both you and your spouse work full-time, either of you can satisfy the full-time work test. However, you cannot add the weeks your spouse worked to the weeks you worked to satisfy that test.
You can deduct your moving expenses on your 2007 tax return even though you have not met the time test by the date your 2007 return is due. You can do this if you expect to meet the 39-week test in 2008 or the 78-week test in 2008 or 2009.
If you do not deduct your moving expenses on your 2007 return, and you later meet the time test, you can file an amended return for 2007 to take the deduction.
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Report your moving expense deduction as other income on your Form 1040 for the year you cannot meet the test, or
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Use Form 1040X to amend your 2007 return, figuring your tax without the moving expense deduction.
Example.
You arrive in the general area of your new job location on September 15, 2007. You deduct your moving expenses on your 2007 return, the year of the move, even though you have not yet met the time test by the date your return is due. If you do not meet the 39-week test during the 12-month period following your arrival in the general area of your new job location, you must either:
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Report your moving expense deduction as other income on your Form 1040 for 2008, or
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Use Form 1040X to amend your 2007 return, figuring your tax without the moving expense deduction.
You do not have to meet the time test if one of the following applies.
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You are in the Armed Forces and you moved because of a permanent change of station. See Members of the Armed Forces, later.
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Your main job location was outside the United States and you moved to the United States because you retired. See Retirees or Survivors Who Move to the United States, later.
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You are the survivor of a person whose main job location at the time of death was outside the United States. See Retirees or Survivors Who Move to the United States, later.
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Your job at the new location ends because of death or disability.
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You are transferred for your employer's benefit or laid off for a reason other than willful misconduct. For this exception, you must have obtained full-time employment and you must have expected to meet the test at the time you started the job.
Figure B
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 earlier. However, you must meet the requirements discussed below under Retirees who were working abroad or Survivors of decedents who were working abroad.
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Your age and health,
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The customary retirement age for people who do similar work,
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Whether you receive retirement payments from a pension or retirement fund, and
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The length of time before you return to full-time work.
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The move is to a home in the United States.
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The move begins within 6 months after the decedent's death. (When a move begins is described below.)
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The move is from the decedent's former home.
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The decedent's former home was outside the United States.
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The decedent's former home was also your home.
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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.
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Your household goods and personal effects are packed and on the way to your home in the United States.
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You leave your former home to travel to your new home in the United States.
If you meet the requirements discussed earlier under Who Can Deduct Moving Expenses, you can deduct the reasonable expenses of:
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Moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and
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Traveling (including lodging but not meals) to your new home.
Example.
Beth's employer transferred her from Boston, Massachusetts, to Buffalo, New York. On her way to Buffalo, Beth drove into Canada to visit the Toronto Zoo. Since Beth's excursion into Canada was away from the usual Boston-Buffalo route, the expenses paid or incurred for the excursion are not deductible. Beth can only deduct what it would have cost to drive directly from Boston to Buffalo. Likewise, Beth cannot deduct any expenses, such as the cost of a hotel room, caused by the delay for sightseeing.
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Your actual expenses, such as the amount you pay for gas and oil for your car, if you keep an accurate record of each expense, or
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The standard mileage rate (20 cents a mile).
If you meet the requirements under Who Can Deduct Moving Expenses, earlier, 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.
Example.
Paul Brown is a resident of North Carolina and has been working there for the last 4 years. Because of the small size of his apartment, he stored some of his furniture in Georgia with his parents. Paul got a job in Washington, DC. It cost him $900 to move his furniture from North Carolina to Washington and $3,000 to move his furniture from Georgia to Washington. If Paul shipped his furniture in Georgia from North Carolina (his former home), it would have cost $1,800. He can deduct only $1,800 of the $3,000 he paid. The amount he can deduct for moving his furniture is $2,700 ($900 + $1,800).
To deduct expenses for a move outside the United States, you must move to the area of a new place of work outside the United States and its possessions. You must meet the requirements under Who Can Deduct Moving Expenses, earlier.
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The cost of moving household goods and personal effects from your former home to your new home.
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The cost of traveling (including lodging) from your former home to your new home.
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The cost of moving household goods and personal effects to and from storage.
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The cost of storing household goods and personal effects while you are at the new job location.
You cannot deduct the following items as moving expenses.
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Any part of the purchase price of your new home.
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Car tags.
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Driver's license.
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Expenses of buying or selling a home (including closing costs, mortgage fees, and points).
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Expenses of entering into or breaking a lease.
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Home improvements to help sell your home.
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Loss on the sale of your home.
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Losses from disposing of memberships in clubs.
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Mortgage penalties.
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Pre-move househunting expenses.
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Real estate taxes.
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Refitting of carpet and draperies.
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Return trips to your former residence.
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Security deposits (including any given up due to the move).
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Storage charges except those incurred in transit and for foreign moves.
This section explains how to report a reimbursement (including advances and allowances) on your tax return. It covers reimbursements for any of your moving expenses discussed in this publication. It also explains the types of reimbursements on which your employer must withhold income tax, social security tax, and Medicare tax.
If you receive a reimbursement for your moving expenses, how you report this amount and your expenses depends on whether the reimbursement is paid to you under an accountable plan or a nonaccountable plan. For a quick overview of how to report your reimbursement and moving expenses, see Table 2 in the section on How and When To Report, later.
Your employer should tell you what method of reimbursement is used and what records are required.
To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules.
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Your expenses must have a business connection - that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home.
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You must adequately account to your employer for these expenses within a reasonable period of time.
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You must return any excess reimbursement or allowance within a reasonable period of time.
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You receive an advance within 30 days of the time you have an expense.
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You adequately account for your expenses within 60 days after they were paid or incurred.
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You return any excess reimbursement within 120 days after the expense was paid or incurred.
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You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.
Example.
You lived in Boston and accepted a job in Atlanta. Under an accountable plan, your employer reimbursed you for your actual traveling expenses from Boston to Atlanta and the cost of moving your furniture to Atlanta.
Your employer will include the reimbursement in box 12 of your Form W-2. If your moving expenses are more than your reimbursement, you may be able to deduct your additional expenses (see How and When To Report, later).
A nonaccountable plan is a reimbursement arrangement that does not meet the three rules listed earlier under Accountable Plans.
In addition, the following payments will be treated as paid under a nonaccountable plan.
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Excess reimbursements you fail to return to your employer.
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Reimbursements of nondeductible expenses. See Reimbursement of nondeductible expenses, earlier.
If an arrangement pays for your moving expenses by reducing your wages, salary, or other pay, the amount of the reduction will be treated as a payment made under a nonaccountable plan. This is because you are entitled to receive the full amount of your pay regardless of whether you had any moving expenses.
If you are not sure if the moving expense reimbursement arrangement is an accountable or nonaccountable plan, ask your employer.
Your employer will add the amount of any reimbursement paid to you under a nonaccountable plan to your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2.
Example.
To get you to work in another city, your new employer reimburses you under an accountable plan for the $7,500 loss on the sale of your home. Because this is a reimbursement of a nondeductible expense, it is treated as paid under a nonaccountable plan and must be included as pay in box 1 of your Form W-2.
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, later.
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Could deduct if you had paid or incurred them, and
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Did not deduct in an earlier year.
This section explains how and when to report your moving expenses and any reimbursements or allowances you received for your move. For a quick overview, see Table 2, below.
Use Form 3903 to figure your moving expense deduction. Use a separate Form 3903 for each move for which you are deducting expenses.
You do not have to complete Form 3903 if all of the following apply.
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You moved to a location outside the United States in an earlier year.
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You are claiming only storage fees while you are away from the United States.
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Any amount your employer paid for the storage fees is included as wages in box 1 of your Form W-2.
Instead, enter the storage fees (after the reduction for the part that is allocable to excluded income) on line 26, Form 1040, and enter “Storage” next to the amount.
If you meet the special rules for members of the Armed Forces, see How to complete Form 3903 for members of the Armed Forces under Members of the Armed Forces, later.
| Table 2.Reporting Your Moving Expenses and Reimbursements |
| IF your Form W-2 shows... | AND you have... | THEN... |
|---|---|---|
|
your reimbursement reported only
in box 12 with code P |
moving expenses greater than the
amount in box 12 |
file Form 3903 showing all allowable
expenses* and reimbursements. |
|
your reimbursement reported only
in box 12 with code P |
moving expenses equal to the amount
in box 12 |
do not file Form 3903. |
|
your reimbursement divided
between box 12 and box 1 |
moving expenses greater than the
amount in box 12 |
file Form 3903 showing all allowable
expenses,* but only the reimbursements reported in box 12. |
|
your entire reimbursement reported
as wages in box 1 |
moving expenses |
file Form 3903 showing all allowable
expenses,* but no reimbursements. |
| no reimbursement | moving expenses |
file Form 3903 showing all allowable
expenses.* |
| * See Deductible Moving Expenses, earlier, for allowable expenses. |
You may have a choice of when to deduct your moving expenses.
Example.
In December 2006, your employer transferred you to another city in the United States, where you still work. You are single and were not reimbursed for your moving expenses. In 2006, you paid for moving your furniture and deducted these expenses on your 2006 tax return. In January 2007, you paid for travel to the new city. You can deduct these additional expenses on your 2007 tax return.