In case you shift to another location due to your job in the current fiscal year, the Internal Revenue Service (IRS) allows you to claim the tax deductible for moving expenses in the next fiscal year’s tax return. You need to fill the tax form 1040 to claim tax deductions.
Deduction of income tax under this category does not have a higher limit; however, you can claim expenses that fulfill complete eligibility requirements. Moreover, if you are availing a reimbursement from the employer, the amount is not regarded as a tax-deductible.
Distance TestIf the distance between your old residence and the location of your new job is equal to or above 50 miles, you can treat the expenses as a tax-deductible. For example, the previous job location was 10 miles away from your house. The location of the new job is equal to or above 60 miles from your house. The earnings from your tax returns will be equal to the travel expenses. If the new job location were 40 miles, you would not be able to claim tax deduction on moving expenses.
Another eligibility condition of the IRS states that the taxpayer must complete 39 weeks of employment after 12 months of joining the new job. Therefore, if you decide to switch jobs in the latter half of the year, your savings will take a beating.
In case, you are unable to fulfill this condition, you can make changes to your tax return documents by submitting the tax form 1040X, entitled Amended U.S. Individual Income Tax Return. In addition, you can file the deduction as ‘income’ in the tax return of the following fiscal year; the amount is reported as other income.
Tax deductibles available on moving expenses are eligible for self, your spouse, family, as well as other dependents. In case, you are married and filing tax returns together, only one of you must qualify for the distance and time tests. No combination is possible in terms of weeks worked in order to fulfill the requirements of the time test.
Such expenses include tax deductibles of packaging and transportation costs of shifting your belongings. Various items of expenses include temporary storage, insurance of valuable items, costs of utility connections, and shipping of pets. Other tax deductibles include gasoline prices if you drive your car along with the boarding and lodging costs; do not include the meal expenses.
You must update the filing documents with your new address, as issued by the IRS. You have to use the tax form 8822 for this purpose.
Financial Aid from the Employer
Usually, when employees shift to a new job location, the employer bears the complete moving cost, as a result, your earning from the tax deductible will be borne by your employer. In case, your employer pays a certain percentage of the moving costs, you need to keep a record of your expenses as well as the employer’s expenses.
Deductible Moving Expenses
The Internal Revenue Service has shortlisted some eligible tax-deductibles under the category of moving expenses. You must keep a track of these expenses, as it will help in your tax preparation.
1. Packaging cost as well transportation expenses covering the transfer of household and valuable personal belongings; the moving expense is a tax-deductible regardless of you shifting on your own or hiring the services of a professional.
2. When you are moving to a new job location, the insurance cost is added to your income as a tax deductible.
3. Some packers and movers offer services of assembling the necessary utilities in your new home. Charges incurred for such services are eligible for tax deductions.
4. In the transit, if you need an overnight accommodation, the boarding and lodging expenses for a single day will be eligible for tax deductions.
5. You have to incur safety costs to store your belongings in the new location. The tax-deductible is applicable even if you keep your belongings safely with one of your family members. However, the storage cost must not exceed a period of 30 days after shifting to the new home.
6. Tax-deductible amount under moving expenses covers the cost incurred for only one trip involving you and other members of the household. However, it is not mandatory that all of you have to travel simultaneously.
7. If you are driving your car, you must deduct the costs incurred on gasoline, engine oil, parking fees as well as at the tollbooths. The expenses will qualify under the category of Itemized Deductions.
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