Tax Deductions for Moving Expenses

Taxpayers who recently relocated my be eligible for a tax break on their federal and state tax return. The IRS eligibility criteria clearly specify who is eligible to deduct moving expenses based on the nature of the move, distance from your former location, and the amount of hours you work. States typically follow the same procedure for determining eligibility.

State Tax Deductions

Some states impose an extra tax in addition to federal taxes. In states that do not have an income tax, you can deduct moving expenses on your federal income tax return. State laws vary regarding the ability to declare moving-related costs on both the state and federal tax returns. For example, California, Oregon and Mississippi laws allow you to declare the same deduction amount on state taxes and federal taxes.

Qualifying

To qualify for a either the federal or state moving deduction, the move must be work-related. Possible scenarios include moving for a job opportunity, your job requiring you to relocate, or moving your business to a different location. Moves in the same state or to a different state are eligible, provided the new business is at least 50 miles from the former location. You are required to maintain full-time employment status at the new job for a minimum of 39 weeks during the first year. If you are self-employed, you must work at least 78 weeks for the first two years following the move.

Qualified Expenses

You cannot claim expenses if you received a reimbursement from your employer to cover the move. Any costs in excess of the reimbursement can be deducted. Qualified expenses you can claim include transportation, lodging, packing and shipping costs. Mileage, based on the shortest, most direct route, parking and toll fees may also be deducted.

Claiming the Deduction

Taxpayers who wish to deduct moving expenses must complete IRS Form 3903, "Moving Expenses." If you are allowed to claim the expenses on your state return, you must complete a separate form. 

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