Are Moving Expenses Tax Deductible:
Are you a freelance or self-employed business owner with no traditional wage? If you have answered yes to these questions, you are probably not earning any income from your regular job. That is why you might feel uncertain about whether your travel expenses are deductible.
To help clear that confusion, here’s an overview of if your expenses related to moving are tax deductible, how much of it depends on the circumstances, and how to identify the right tax software for expenses related to moving.
Anyone who’s ever moved knows that it can be expensive. The costs of preparing your new home, buying and securing furniture and getting everything situated in your new space can add up fast. In addition to the expenses you incur when you move, you may also be able to take advantage of a tax deduction for moving expenses.
If you are planning on relocating for employment or for other reasons, you may qualify for a special rules regarding taxes. You may be able to deduct certain expenses from your income if they relate directly to your move and are not personal endeavors.
Expenses that qualify as moving costs include rent or mortgage payments, real estate agent fees, insurance premiums and any repairs associated with the move itself. You will usually only be able to take this tax deduction once in your lifetime — after which you must wait 10 years before you are eligible again (per IRS guidelines).
What Is a Tax Deductible Moving Expense?
Moving expenses are those costs you incur when you move your household. This can include paying rent or mortgage on the new home and any related costs like realtor fees, insurance or moving supplies. You can also deduct moving costs if you move for a job or if you are moving to start a new business.
Can You Deduce a Moving Cost?
If all of the above applies to you, then you may be able to deduct your moving costs. You will be able to take tax deductions for moving expenses if they are related to your move and not part of a personal undertaking.
If your new home is more than 50 miles from your old home, this is a legitimate deduction. Moving expenses are classified as either “qualified” or “unqualified”.
Qualified expenses are those that directly relate to your move and are not part of a larger undertaking. These expenses are limited to real estate taxes, realtor fees, packing and crating materials, and transportation costs.
Unqualified expenses fall into two categories: “ Adjusted Gross Income “ (AGI) and “ Deductible Expenses “. These are the two categories that potential moving expenses fall under.
Can You Deduct a Moving Cost?
If your expenses fall under the “qualified” moving category, you may be able to deduct them on your taxes. You will want to review your moving expenses and determine if they qualify under the “qualified” moving category. You may be able to take a deduction for moving costs if they fit these criteria.
How Much Can You Deduct?
Moving expenses can be a significant deduction for you if they fit into the “qualified” category. For example, if you are moving a significant distance and incur significant expenses, you may be able to deduct a large amount.
This is more likely to occur if the move is for work or a career change. If you move for any other reason, the deduction is usually limited. The amount you can deduct will be based on your adjusted gross income (AGI). This is what it usually ends up being between 10% and 30% of your total income.
Other Things You May Be Able To Deduct From Your Taxes
If you are able to claim a moving deduction, you may be able to deduct other things from your taxes as well. If the move is for employment, you may be able to claim moving expenses as an employment expense. In addition, you may be able to deduct the cost of packing, crating and disposing of your move-related items.
Move for Employment — Move for New Job
If you are moving to take a new job, you may be able to take advantage of a tax deduction for your moving expenses. This is especially advantageous if you are moving in order to obtain a better-paying job. You can deduct your moving expenses if you are moving for work-related reasons.
If you move for a promotion, job opening or to accommodate an increased workload, you may be able to deduct your moving costs. If your move is for a new job, you may be eligible to take a tax deduction. You will be able to take this deduction if you can show that your move was directly related to your employment.
Move for Career Advancement
If your move is for a career advancement or to obtain an advanced degree, you may be able to take advantage of a tax deduction for your moving expenses. This is true even if the move is not directly related to your work. If your new position is higher-paying or you are pursuing an advanced degree, you may be able to take advantage of a tax deduction for your moving expenses.
Once you understand the rules around moving expenses, you can better plan for the costs associated with a move. If your new home is more than 50 miles from your old home, this may be a legitimate deduction.
If you are moving for work-related reasons, you may be able to deduct your costs. And if you are moving for a career advancement or for an advanced degree, you may be able to deduct your expenses as well.