Which Moving Expenses are Deductible?

Moving expenses may be deductible on Form 1040 if a taxpayer moves to a new home because of a new principal workplace. The following tests must be met.   

Closely Related to the Start of Work Test

The move will be considered closely related to a new work location if the move is within one year of the date the taxpayer started working at the new location, and the distance from the new home to the new job location is not more than the distance from the old home to the new job location.

Distance Test

The new principal workplace must be at least 50 miles farther from the taxpayer’s old home than the old workplace was. For example, if the old workplace was three miles from the old home, the new workplace must be at least 53 miles from the old home. If the taxpayer did not have an old workplace, the new workplace must be at least 50 miles from the old home. Members of the Armed Forces do not have to meet this distance test.

Time Test

Employees must work full time in the general area of the new workplace for at least 39 weeks during the 12 months after the move. Self-employed taxpayers must work full time in the general area of the new workplace for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months after the move.

Exceptions: The time test does not apply if the job ends because of disability, the employer transfers the employee, the employee was laid off for other than willful misconduct, the taxpayer is a member of the Armed Forces, the taxpayer meets certain requirements for retirees or survivors living outside the U.S., or the taxpayer is a decedent.

Although the move must be closely related to the start of work in a new location, there is no requirement that a new job be in the same line of work as the old job. A taxpayer starting work for the first time qualifies provided the job is at least 50 miles from the old home.

Deductible Moving Expenses

The cost of transportation and storage (up to 30 days after the move) of household goods and personal effects.

Travel, including lodging, from the old home to the new home. Travel is limited to one trip per person. However, each member of the household can move separately and at separate times. If the taxpayer drives his or her own vehicle, expenses can be figured either using actual out-of-pocket expenses for gas and oil (but not depreciation), or the standard mileage rate for moving (for 2014, 23.5¢ per mile), plus parking fees and tolls. Not deductible. Cost of meals while traveling, temporary living expenses, or house hunting expenses before or after the move.

Employer-Reimbursed Moving Expenses

Eligible moving expenses reimbursed by an employer are excluded from taxable wages. The amount of excluded moving expenses is reported in box 12 of the employee’s Form W-2 under code “P.” Qualified expenses that are reimbursed by the employer are not eligible for a deduction. Additional moving expenses that are not reimbursed by the employer are eligible for a deduction on Form 1040 if they otherwise qualify.

Nondeductible Expenses

The following expenses are not deductible as moving expenses.

Any part of the purchase price of a new home.

Car tags or driver’s license.

Expenses of entering into or breaking a lease.

Loss on home sale.

Mortgage penalties

Pre-move househunting trips.

Real estate taxes.

Security deposits.