Can I Deduct Moving Expenses if I Am a Student?
Employees who relocate for business reasons can deduct their moving expenses in limited circumstances. Generally, the Internal Revenue Service limits the moving expenses deduction to taxpayers who moved to change jobs, to look for new work or to start a new business. For students, the IRS does not allow them to deduct the costs of relocation for educational purposes unless they also moved to find or start a new job.
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Time and Distance Tests
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The federal moving expense deduction allows taxpayers to deduct the reasonable costs they incurred while relocating for business reasons. The IRS uses two tests to determine whether a taxpayer qualified for the moving expenses deduction. First, under the "time test," taxpayers must work within 12 months of moving. Specifically, taxpayers can deduct their moving expenses if they work 39 weeks on a full-time basis during the first year. Second, under the "distance test," taxpayers must move at least 50 miles away. The distance test requires that a taxpayer's new location be at least 50 miles from his old home.
Rules for Self-Employed Taxpayers
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Self-employed taxpayers must also work 39 weeks within the first year but also work 78 weeks within two years of moving. In other words, if self-employed taxpayers worked 39 weeks in the first 12 months of moving, they must work an additional 39 weeks during their second year.
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Students and Moving Expense Deductions
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Although the IRS limits the moving expenses deduction to taxpayers who moved to change business locations or to seek new employment, students may be able to claim the deduction if they had to move due to an involuntary employment termination, because of a disability or death and only if they move and begin working. For instance, if a taxpayer becomes unemployed and she decides to enroll in school, she may deduct her moving expenses to attend school but she must also work full-time and qualify under the distance and time tests. However, in the case of students who graduate from school and move to find job opportunities in different markets, the IRS deduction of the reasonable costs of qualified moving expenses if they meet the distance and time tests and begin working full-time.
Deductible Moving Expenses
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Deductible moving expenses are limited to third-party moving fees, fees for storing household items and fees incurred for travel, including the costs of hotels and other lodging. Only the costs of moving, storing personal belongings and lodging expenses incurred while moving are deductible, and the IRS does not allow taxpayers to deduct the costs of meals consumed while they are relocating or house-hunting fees. Furthermore, membership cancellation fees, lease cancellation fees, car registration and license fees and home improvements or fees incurred to sell a taxpayer's home are not deductible moving expenses.
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