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Moving Expenses, Publication 521 (2008)

What's New

Standard mileage rate. For 2008, the standard mileage rate for using your vehicle to move to a new home is 19 cents a mile (27 cents a mile after June 30, 2008). See Travel by car under Deductible Moving Expenses.

Reminders

Change of address. If you change your mailing address, be sure to notify the IRS using Form 8822, Change of Address. Mail it to the Internal Revenue Service Center for your old address. Addresses for the service centers are on the back of the form.

Introduction

This publication explains the deduction of certain expenses of moving to a new home because you changed job locations or started a new job. It includes the following topics.

• Who can deduct moving expenses.
• What moving expenses are deductible.
• What moving expenses are not deductible.
• How a reimbursement affects your moving expense deduction.
• How and when to report moving expenses.
• Special rules for members of the Armed Forces.

Form 3903, Moving Expenses, is used to claim the moving expense deduction. An example of how to report your moving expenses, including a filled-in Form 3903, is shown near the end of the publication.

You may be able to deduct moving expenses whether you are self-employed or an employee. Your expenses generally must be related to starting work at your new job location. However, certain retirees and survivors may qualify to claim the deduction even though they are not starting work at a new job location. See Who Can Deduct Moving Expenses.

Recordkeeping.

Useful Items - You may want to see:

Publication

• 3 Armed Forces' Tax Guide

Forms (and Instructions)

• 1040 U.S. Individual Income Tax Return
• 1040X Amended U.S. Individual Income Tax Return
• 3903 Moving Expenses
• 8822 Change of Address

See How To Get Tax Help, near the end of this publication, for information about getting the publications and the forms listed above.

Deductible Moving Expenses

If you meet the requirements discussed earlier under Who Can Deduct Moving Expenses, you can deduct the reasonable expenses of:

• Moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and
• Traveling (including lodging but not meals) to your new home.

You cannot deduct any expenses for meals.

Reasonable expenses.

You can deduct only those expenses that are reasonable for the circumstances of your move. For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. If during your trip to your new home, you stop over, or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses.

Travel by car.

If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either:

• Your actual expenses, such as the amount you pay for gas and oil for your car, if you keep an accurate record of each expense, or
• The standard mileage rate of 19 cents per mile (27 cents per mile after June 30, 2008).

Whether you use actual expenses or the standard mileage rate to figure your expenses, you can deduct the parking fees and tolls you pay to move. You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car.

Member of your household.

You can deduct moving expenses you pay for yourself and members of your household. A member of your household is anyone who has both your former and new home as his or her home. It does not include a tenant or employee, unless that person is your dependent.

Moves to Locations in the United States

If you meet the requirements under Who Can Deduct Moving Expenses, earlier, you can deduct expenses for a move to the area of a new main job location within the United States or its possessions. Your move may be from one U.S. location to another or from a foreign country to the United States.

Household goods and personal effects.

You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home. For purposes of moving expenses, the term “personal effects” includes, but is not limited to, movable personal property that the taxpayer owns and frequently uses. If you use your own car to move your things, see Travel by car, earlier. You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects. You can deduct the cost of shipping your car and your household pets to your new home. You can deduct the cost of moving your household goods and personal effects from a place other than your former home. Your deduction is limited to the amount it would have cost to move them from your former home.

Storage expenses.

You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home.

Travel expenses.

You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. This includes expenses for the day you arrive. You can include any lodging expenses you had in the area of your former home within one day after you could no longer live in your former home because your furniture had been moved. The members of your household do not have to travel together or at the same time. However, you can only deduct expenses for one trip per person. If you use your own car, see Travel by car, earlier.

Example.

In February 2008, Josh and Robyn Black moved from Minneapolis to Washington, DC, where Josh was starting a new job. Josh drove the family car to Washington, DC, a trip of 1,100 miles. His expenses were $209 for mileage (1,100 miles x 19 cents per mile) plus $40 for tolls and $150 for lodging, for a total of $399. One week later, Robyn flew from Minneapolis to Washington, DC. Her only expense was her $400 plane ticket. The Blacks' deduction is $799 (Josh's $399 + Robyn's of $400).

Moves to Locations Outside the United States

To deduct expenses for a move outside the United States, you must move to the area of a new place of work outside the United States and its possessions. You must meet the requirements under Who Can Deduct Moving Expenses, earlier.

Deductible expenses.

If your move is to a location outside the United States and its possessions, you can deduct the following expenses.

• The cost of moving household goods and personal effects from your former home to your new home.
• The cost of traveling (including lodging) from your former home to your new home.
• The cost of moving household goods and personal effects to and from storage.
• The cost of storing household goods and personal effects while you are at the new job location.

The first two items were explained earlier under Moves to Locations in the United States. The last two items are discussed below.

Moving goods and effects to and from storage.

You can deduct the reasonable expenses of moving your personal effects to and from storage.

Storage expenses.

You can deduct the reasonable expenses of storing your household goods and personal effects for all or part of the time the new job location remains your main job location.

Moving expenses allocable to excluded foreign income.

Nondeductible Expenses

You cannot deduct the following items as moving expenses.

• Any part of the purchase price of your new home.
• Car tags.
• Driver's license.
• Expenses of buying or selling a home (including closing costs, mortgage fees, and points).
• Expenses of entering into or breaking a lease.
• Home improvements to help sell your home.
• Loss on the sale of your home.
• Losses from disposing of memberships in clubs.
• Mortgage penalties.
• Pre-move househunting expenses.
• Real estate taxes.
• Refitting of carpet and draperies.
• Return trips to your former residence.
• Security deposits (including any given up due to the move).
• Storage charges except those incurred in transit and for foreign moves.

No double deduction.

Reimbursements

This section explains how to report a reimbursement (including advances and allowances) on your tax return. It covers reimbursements for any of your moving expenses discussed in this publication. It also explains the types of reimbursements on which your employer must withhold income tax, social security tax, and Medicare tax.

Types of Reimbursement Plans

If you receive a reimbursement for your moving expenses, how you report this amount and your expenses depends on whether the reimbursement is paid to you under an accountable plan or a nonaccountable plan. For a quick overview of how to report your reimbursement and moving expenses, see Table 2 in the section on How and When To Report, later.

Your employer should tell you what method of reimbursement is used and what records are required.

Accountable Plans

To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules.

• Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home.
• You must adequately account to your employer for these expenses within a reasonable period of time.
• You must return any excess reimbursement or allowance within a reasonable period of time.

Adequate accounting.

You adequately account for your moving expenses by giving your employer documentation of those expenses, such as a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it. Documentation includes receipts, canceled checks, and bills.

Reasonable period of time.

What constitutes a “reasonable period of time” depends on the facts and circumstances of your situation. However, regardless of the facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time.

• You receive an advance within 30 days of the time you have an expense.
• You adequately account for your expenses within 60 days after they were paid or incurred.
• You return any excess reimbursement within 120 days after the expense was paid or incurred.
• You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.

Excess reimbursement.

This includes any amount you are paid (including advances and allowances) that is more than the moving expenses that you adequately accounted for to your employer within a reasonable period of time.

Returning excess reimbursements.

You must be required to return any excess reimbursement for your moving expenses to the person paying the reimbursement. Excess reimbursement includes any amount for which you did not adequately account within a reasonable period of time. For example, if you received an advance and you did not spend all the money on deductible moving expenses, or you do not have proof of all your expenses, you have an excess reimbursement.

You meet accountable plan rules.

You do not meet accountable plan rules.

You may be reimbursed by your employer, but you may not meet all three rules for part of your expenses. If your deductible expenses are reimbursed under an otherwise accountable plan but you do not return, within a reasonable period, any reimbursement of expenses for which you did not adequately account, then only the amount for which you did adequately account is considered as paid under an accountable plan. The remaining expenses are treated as having been reimbursed under a nonaccountable plan (discussed below).

Reimbursement of nondeductible expenses.

You may be reimbursed by your employer for moving expenses, some of which are deductible expenses and some of which are not deductible. The reimbursements you receive for the nondeductible expenses and any allowances for miscellaneous or unspecified expenses are treated as paid under a nonaccountable plan (see below) and are included in your income. If you are reimbursed by your employer for the taxes you must pay (including social security and Medicare taxes) because you have received taxable moving expense reimbursements, you must pay tax on this reimbursement as well, and it is treated as paid under a nonaccountable plan.

Nonaccountable Plans

A nonaccountable plan is a reimbursement arrangement that does not meet the three rules listed earlier under Accountable Plans.

In addition, the following payments will be treated as paid under a nonaccountable plan.

• Excess reimbursements you fail to return to your employer.
• Reimbursements of nondeductible expenses. See Reimbursement of nondeductible expenses, earlier.

If an arrangement pays for your moving expenses by reducing your wages, salary, or other pay, the amount of the reduction will be treated as a payment made under a nonaccountable plan. This is because you are entitled to receive the full amount of your pay regardless of whether you had any moving expenses.

If you are not sure if the moving expense reimbursement arrangement is an accountable or nonaccountable plan, ask your employer.

Your employer will add the amount of any reimbursement paid to you under a nonaccountable plan to your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2.

Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970

Do not include in income any moving expense payment you received under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. These payments are made to persons displaced from their homes, businesses, or farms by federal projects.

Tax Withholding and Estimated Tax

Your employer must withhold income tax, social security tax, and Medicare tax from reimbursements and allowances paid to you that are included in your income. See Reimbursements included in income, later.

Reimbursements excluded from income.

Your employer should not include in your wages reimbursements paid under an accountable plan (explained earlier) for moving expenses that you:

• Could deduct if you had paid or incurred them, and
• Did not deduct in an earlier year.

Expenses deducted in earlier year.

Reimbursements included in income.

Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even though they are for deductible moving expenses. See Nonaccountable Plans under Types of Reimbursement Plans, earlier. Your employer also must include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. This includes amounts your employer reimbursed you under an accountable plan (explained earlier) for meals, househunting trips, and real estate expenses. It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer.

Reimbursement for deductible and nondeductible expenses.

If your employer reimburses you for both deductible and nondeductible moving expenses, your employer must determine the amount of the reimbursement that is not taxable and not subject to withholding. Your employer must treat any remaining amount as taxable wages and withhold income tax, social security tax, and Medicare tax.

Amount of income tax withheld.

Estimated tax.

Illustrated Example

Tom and Peggy Smith are married and have two children. They owned a home in Detroit where Tom worked. On February 8, 2008, Tom's employer told him that he would be transferred to San Diego as of April 10 that year. Peggy flew to San Diego on March 1 to look for a new home. She put a down payment of $25,000 on a house being built and returned to Detroit on March 4. The Smiths sold their Detroit home for $1,500 less than they paid for it. They contracted to have their personal effects moved to San Diego on April 3. The family drove to San Diego where they found that their new home was not finished. They stayed in a nearby motel until the house was ready on May 1. On April 10, Tom went to work in the San Diego plant where he still works.

Their records for the move show:

Tom was reimbursed $10,797 under an accountable plan. His employer gave him the following breakdown of the reimbursement that was allowed under the employer's plan.

The employer included this reimbursement on Tom's Form W-2 for the year. The reimbursement of allowable expenses, $7,244 for moving household goods and travel to San Diego, was included in box 12 of Form W-2. His employer identified this amount with code P.

The employer included the balance, $3,553 reimbursement of nonallowable expenses, in box 1 of Form W-2 with Tom's other wages. Tom must include this amount on Form 1040, line 7. The employer withholds taxes from the $3,553, as discussed under Reimbursement for deductible and nondeductible expenses under Tax Withholding and Estimated Tax, earlier. Also, Tom's employer could have given him a separate Form W-2 for his moving expense reimbursement.

To figure his tax deduction for moving expenses, Tom enters the following amounts on Form 3903.

Tom's Form 3903 and Distance Test Worksheet are shown on page 15. He also enters his deduction, $1,354, on Form 1040, line 26.

Nondeductible expenses.

Of the $43,172 expenses that Tom and Peggy incurred, the following items totaling $34,574 ($43,172 – $8,598) cannot be deducted.

• Item 1 — pre-move househunting expenses of $524.
• Item 2 — the $25,000 down payment on the San Diego home. If any part of it were for payment of deductible taxes or interest on the mortgage on the house, that part would be deductible as an itemized deduction.
• Item 3 — the $3,500 real estate commission paid on the sale of the Detroit home. The commission is used to figure the gain or loss on the sale.
• Item 4 — the $1,500 loss on the sale of the Detroit home.
• Item 6 — the $320 expense for meals while driving to San Diego. (However, the lodging and car expenses are deductible.)
• Item 7 — temporary living expenses of $3,730.

Form 3903--Smith

Members of the Armed Forces

If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet the distance and time tests, discussed earlier. You can deduct your unreimbursed moving expenses.

A permanent change of station includes:

• A move from your home to your first post of active duty,
• A move from one permanent post of duty to another, and
• A move from your last post of duty to your home or to a nearer point in the United States. The move must occur within one year of ending your active duty or within the period allowed under the Joint Travel Regulations.

Spouse and dependents.

If a member of the Armed Forces dies, is imprisoned, or deserts, a permanent change of station for the spouse or dependent includes a move to:

• The place of enlistment,
• The member's, spouse's, or dependent's home of record, or
• A nearer point in the United States.

If the military moves you and your spouse and dependents to or from separate locations, the moves are treated as a single move to your new main job location.

Services or reimbursements provided by government.

How to complete Form 3903 for members of the Armed Forces.

Take the following steps.

1. Complete lines 1 through 3 of the form, using your actual expenses. Do not include any expenses for moving services provided by the government. Also, do not include any expenses that were reimbursed by an allowance you do not have to include in your income.
2. Enter on line 4 the total reimbursements and allowances you received from the government for the expenses claimed on lines 1 and 2. Do not include the value of moving or storage services provided by the government. Also, do not include any part of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance.
3. Complete line 5. If line 3 is more than line 4, subtract line 4 from line 3 and enter the result on line 5 and on Form 1040, line 26. This is your moving expense deduction. If line 3 is equal to or less than line 4, you do not have a moving expense deduction. Subtract line 3 from line 4 and, if the result is more than zero, enter it on Form 1040, line 7.

If the military moves you and your spouse and dependents to or from different locations, treat these moves as a single move. Do not deduct any expenses for moving or storage services provided by the government.

Getting Help for Federal Taxes from the Federal Government

List of Popular IRS Publications

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