Tax Implications for Moving Expenses

Although many "new employees" are aware that moving expenses are GeneRally deductible, many are clueless on the criteria that they must satisfy to actually deduct moving expenses. The cost of moving, although commonly paid for by the employer, can be very costly for individuals and families. If a new employee must pay for their moving costs, then it is important for him or her to know the deductibility status of those costs to offset the initial costs.

Are Moving Expenses Deductible For Tax Purposes?

Sometimes. Pursuant to U.S.C. § 217(a), moving expenses may be deducted "during the taxable year in connection with the commencement of work by the taxpayer as an employee or as a self-employed individual at a new principal place of work."

Although the above statement seemingly allows all moving expenses to be deductible, new employees must satisfy the two following conditions to deduct the moving expenses:

1) Geographic Condition: The distance between the employee's old residence and the new job location must be at least 50 miles further than the distance between the old residence and the old job location. U.S.C. § 217(c)(1). If the employee had no prior principal place of work then the new job location must be 50 miles from his or her residence. Id. The distance is calculated by the "shortest of the more commonly traveled routes" between the two locations. Id.

2) Time Condition: The taxpayer must also be employed at the new job at the new location for at least 39 weeks of the year following the move or at least 78 weeks of the following 2 years. U.S.C. § 217(c)(2). The time condition does not apply to new employees that are unable to satisfy the condition due to death, disability, or involuntary separation from an employee. U.S.C. § 217 (d)(1).

If the new employee satisfies the above conditions, the taxpayers can deduct all "reasonable" expenses of moving items (e.g. moving household goods and personal effects) from the old residence to the new residence. U.S.C. § 217(b)(1).The taxpayer can also deduct expenses related to traveling between the two residences. Id.

Spouses and Dependents

Spouses and dependents can also deduct moving and traveling expenses if they lived with the taxpayer before the move and will continue to live with him or her after the move. U.S.C. § 217(b)(2).