How to Calculate Relocation Taxes

Using a tax deduction helps you decrease your tax liability.

If you are moving to a new location, you need to report relocation expenses to use the expense as a tax deduction on your income tax return. To use the deduction, you must move more than 50 miles away from your current location and you must work at your new job for an extended period of time. Form 3903 helps you calculate relocation for taxes and helps you determine your eligibility for the tax deduction.

Instructions

1. Add together the cost to move and store personal goods for your move to the amount of travel costs. Travel costs include items such lodging and gas. Use Form 3903 as a worksheet for this calculation.

2. Compare the number from Step 1 to the amount on Form W-2 Box 12 with code P next to it.

3. Subtract Form W-2 Box 12 from the number calculated in Step 1. If the amount is positive, you can deduct relocation expenses. If the number is negative, you cannot deduct relocation expenses.

4. Transfer this amount calculated from Form 3903 to Form 1040. Look for the "Moving Expenses" on the form.

References

• Internal Revenue Service: Publication 521
• IRS: Form 3903
• IRS: Form 1040