How to Use Moving Expenses as a Tax Deduction

The IRS allows individuals who meet certain tests to take a tax deduction for some moving expenses incurred in the process of moving from one home to another in order to relocate near a new primary workplace. Taxpayers who wish to deduct moving expenses must pass a "distance test" and a "time test" to be eligible for the deduction, which is taken on IRS Form 3903.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• IRS Form 3903
• Moving expense records and documentation

1. Maintain detailed financial records of your moving expenses. Include records of the cost of traveling from your old home to your new home, lodging along the way and moving your household goods and personal effects to your new home.

2. Use the Form 3903 eligibility tests to assess if you are eligible for the deduction. Some members of the armed services and employees who are laid off or terminated for reasons other than willful misconduct may waive the time test.

3. Take the distance test on IRS Form 3903. The distance from your old home to your new workplace must be more than 50 miles greater than the distance from your old home to your old workplace for you to pass.

4. Take the the time test on IRS Form 3903. If you are an employee, you must work full-time in the general area of your new workplace for at least 39 weeks during the 12 months after you move. For self-employed workers, the time test is more rigorous.

5. Fill out IRS Form 3903 if both the distance test and the time test find you eligible to deduct moving expenses. Provide your name and social security number at the top of Form 3903. Enter your cost for moving your household goods on line 1 and your cost of travel to your new home, including lodging, on line 2. Total them on line 3.

6. Enter the net amount of your unreimbursed moving expenses on line 5 and again on line 26 of Form 1040 after subtracting any amount reimbursed by your employer. Deductions for moving expenses do not require you to itemize deductions.

7. File Form 3903 with your completed Form 1040 tax return.

Tips & Warnings

• You can deduct moving expenses for the year in which they occur, if you expect to qualify via the time test. However, if you are eventually disqualified via the time test, you must file Form 1040X as an amended tax return.