The cost of moving can be very expensive. And you may wonder if you are eligible for filing the expenses on your tax return. The truth is the Internal Revenue Service has laid out strict rules with regard to who can deduct moving expenses from taxes. To make sure you do not get in trouble in filing a wrongful claim, it is advised that you go through the rules and requirements carefully.
There are basically three conditions that must be met. These conditions define who can deduct moving expenses from taxes. And such include the following:
1. The move must be related to the start of work.
2. The move must meet the distance test.
3. The move must be able to meet the time test.
If the reason for your move is to start a new job or perhaps to seek new opportunities in the city, there is a good chance you may be able to qualify for the tax deduction. Among the things that are included in the expenses you may be able to deduct are the cost of packing and shipping personal property and household goods. It can also include travel and lodging costs.
If you are a retiree who is moving to the United States, however, you qualify for the tax deduction automatically. It does not even matter whether or not you are starting a new job in the city you moved to. That means there are no additional tests required.
In Relation to the Start of Work
Your move must be both closely related to your new work in both time and place. What closely related in time means that the move must be done within a year from the start of your new work. However, even if you fail to meet the 12 month period, you may still be able to file provided there is a valid reason why the move was postponed.
The Distance Test
In order to qualify for the tax deduction, it is not enough that your new place of residence is closer to work than the old residence. The location of your new employment must be at a distance at least 50 miles farther from the old place of residence than the distance between your previous job location and the old place of residence.
Simply put, if your old job was 5 miles away from the old residence, the location of your new employment must be at least 55 miles from the old residence. Moreover, the shortest route is what gets considered in the distance test.
The Time Test
There are two categories in the time test. One is reserved for employees and the other is for the self-employed individuals.
For employees, the time test requires that your full-time job demands at least 39 work weeks in the first year after your arrival to your new place of residence. On the other hand, self-employed individuals are subjected to what is called a 78-week test. That means they must complete at least 78 weeks’ worth of work in the new job location within the first 2 years after arrival.
Make sure you completely understand the conditions and limitations as regards to who can deduct moving expenses from taxes. Just in case, keep your receipts with you and if you find it necessary, consult with a tax accountant.
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