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Find out if you qualify and what you can deduct

If you moved to a new town to take a job during 2004, good news. You probably don’t have to pay all of the costs. If your employer didn’t pick up the tab, Uncle Sam might take care of some of the partial costs.

Which moving expenses are deductible? The moving expense deduction has changed a lot over the years. For 2004, it’s simple.

General deductions for moving your family and possessions are:

  • Required lodging (but not meals) en route to your new home.
  • Cost of moving household goods and personal effects.
  • Temporary storage of your household goods (up to 30 days).

Qualified moving expenses are treated as an adjustment to income. This means that you can deduct them whether or not you itemize deductions. You’ll need file Form 1040 (the long form) and attach Form 3903.

Of course, not all moves are deductible. In order to deduct your moving expenses, you have to meet two tests:

  • Time
    You must begin working as a full-time employee within 13 weeks of your move, and you must work at least 39 weeks during the 12 months after your move. And it doesn’t matter whether you were transferred by your employer or you took a brand new job. Your move doesn’t even have to be “work-related,” as long as you have a full-time job in the new location.
  • Distance
    To meet this test, your new job has to be at least 50 miles further from your old home than your old job was. If you didn’t have a job before the move, your new job has to be at least 50 miles from your old home.

Two more details:

Your move has to make your commute shorter than it was prior to your move. In other words, the IRS won’t allow you to deduct your move if you move further away. Finally, your move must be closely related to the start of your new job. Generally, this means you have to incur and pay your moving expenses within a year of starting the job, unless circumstances prevented you from moving earlier.

Remember, for most taxpayers, expenses are deductible in the year they were paid, regardless of when they were incurred.

What could be better than a tax deduction? How about your employer paying for your move? Many employers will pay some or all of the cost of the move when they transfer an employee to a new area. These payments of qualified moving expenses are excluded from your taxable income and should be noted with a code P in box 12 of your W-2. But be aware of this: Some employers pay for things that would not be deductible — possibly because they’re just being nice, but probably because they used to be deductible. If your employer pays for things like the expense of selling your old home, buying a new home, breaking a lease, acquiring a new lease, temporary housing or meals eaten during your move, these amounts must be included in your taxable income. The employer will probably add them to Box 1 of your W-2.

But even with the additional tax, it’s a pretty good deal.

*If you’re self-employed in the new location, you must also work at least 78 weeks during the first 24 months.

Please consult your tax advisor for details or visit Nazaire & Co.