What's New
Standard mileage rate. The standard mileage rate for moving expenses has been increased to 20 cents a mile. 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
It is important to maintain an accurate record of expenses you paid to move. You should save items such as receipts, bills, cancelled checks, credit card statements, and mileage logs. Also, you should save your Form W-2 and statements of reimbursement from your employer.
Useful Items - You may want to see:
Publication
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.
Who Can Deduct Moving Expenses
You can deduct your moving expenses if you meet all three of the following requirements.
- Your move is closely related to the start of work.
- You meet the distance test.
- You meet the time test.
After you have read these rules, you may want to use Figure B to help you decide if you can deduct your moving expenses.
Retirees, survivors, and Armed Forces members
Different rules may apply if you are a member of the Armed Forces or a retiree or survivor moving to the United States. These rules are discussed later in this publication.
Move Related to Start of Work
Your move must be closely related, both in time and in place, to the start of work at your new job location.
Closely related in time
You can generally consider moving expenses incurred within 1 year from the date you first reported to work at the new location as closely related in time to the start of work. It is not necessary that you arrange to work before moving to a new location, as long as you actually go to work in that location. If you do not move within 1 year of the date you begin work, you ordinarily cannot deduct the expenses unless you can show that circumstances existed that prevented the move within that time.
Example —
Your family moved more than a year after you started work at a new location. You delayed the move for 18 months to allow your child to complete high school. You can deduct your moving expenses.
Closely related in place
You can generally consider your move closely related in place to the start of work if the distance from your new home to the new job location is not more than the distance from your former home to the new job location. If your move does not meet this requirement, you may still be able to deduct moving expenses if you can show that:
- You are required to live at your new home as a condition of your employment, or
- You will spend less time or money commuting from your new home to your new job location.
Home defined
Your home means your main home (residence). It can be a house, apartment, condominium, houseboat, house trailer, or similar dwelling. It does not include other homes owned or kept up by you or members of your family. It also does not include a seasonal home, such as a summer beach cottage. Your former home means your home before you left for your new job location. Your new home means your home within the area of your new job location.
Retirees or survivors
You may be able to deduct the expenses of moving to the United States or its possessions even though the move is not related to the start of work at a new job location. You must have worked outside the United States or be a survivor of someone who did. See Retirees or Survivors Who Move to the United States, later.
Distance Test
Your move will meet the distance test if your new main job location is at least 50 miles farther from your former home than your old main job location was from your former home. For example, if your old main job location was 3 miles from your former home, your new main job location must be at least 53 miles from that former home. You can use Worksheet 1 to see if you meet this test.
The distance between a job location and your home is the shortest of the more commonly traveled routes between them. The distance test considers only the location of your former home. It does not take into account the location of your new home. See Figure A, below.
Worksheet 1. Distance Test
| Note. Members of the Armed Forces may not have to meet this test. See Members of the Armed Forces. | |||
| 1. | Enter the number of miles from your old home to your new workplace | 1. | miles |
| 2. | Enter the number of miles from your old home to your old workplace | 2. | miles |
| 3. | Subtract line 2 from line 1. If zero or less, enter -0- | 3. | miles |
| 4. | Is line 3 at least 50 miles? □ Yes. You meet this test. □ No. You do not meet this test. You cannot deduct your moving expenses. | ||
Example —
You moved to a new home less than 50 miles from your former home because you changed main job locations. Your old main job location was 3 miles from your former home. Your new main job location is 60 miles from that home. Because your new main job location is 57 miles farther from your former home than the distance from your former home to your old main job location, you meet the distance test.
Figure A - Illustration of Distance Test
Armed Forces
If you are in the Armed Forces and you moved because of a permanent change of station, you do not have to meet the distance test. See Members of the Armed Forces, later.
Main job location
Your main job location is usually the place where you spend most of your working time. This could be your office, plant, store, shop, or other location. If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work.
Union members
If you work for several employers on a short-term basis and you get work under a union hall system (such as a construction or building trades worker), your main job location is the union hall.
More than one job
If you have more than one job at any time, your main job location depends on the facts in each case. The more important factors to be considered are:
- The total time you spend at each place,
- The amount of work you do at each place, and
- How much money you earn at each place.
Time Test
To deduct your moving expenses, you also must meet one of the following two time tests.
- The time test for employees.
- The time test for self-employed persons.
Both of these tests are explained below. See Table 1, below, for a summary of these tests.
You can deduct your moving expenses before you meet either of the time tests. SeeTime Test Not Yet Met, later.
Time Test for Employees
If you are an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location (39-week test). Full-time employment depends on what is usual for your type of work in your area.
For purposes of this test, the following four rules apply.
- You count only your full-time work as an employee, not any work you do as a self-employed person.
- You do not have to work for the same employer for all 39 weeks.
- You do not have to work 39 weeks in a row.
- You must work full time within the same general commuting area for all 39 weeks.
Temporary absence from work
You are considered to have worked full time during any week you are temporarily absent from work because of illness, strikes, lockouts, layoffs, natural disasters, or similar causes. You are also considered to have worked full time during any week you are absent from work for leave or vacation provided for in your work contract or agreement.
Seasonal work
If your work is seasonal, you are considered to be working full time during the off-season only if your work contract or agreement covers an off-season period of less than 6 months. For example, a school teacher on a 12-month contract who teaches on a full-time basis for more than 6 months is considered to have worked full time for the entire 12 months.
Time Test for Self-Employed Persons
If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive in the general area of your new job location (78-week test).
For purposes of the time test for self-employed persons, the following three rules apply.
- You count any full-time work you do either as an employee or as a self-employed person.
- You do not have to work for the same employer or be self-employed in the same trade or business for the 78 weeks.
- You must work within the same general commuting area for all 78 weeks.
| Table 1.Satisfying the Time Test for Employees and Self-Employed Persons |
| IF you are... | THEN you satisfy the time test by meeting the... |
|---|---|
| an employee | 39-week test for employees. |
| self-employed | 78-week test for self-employed persons. |
| both self-employed and an employee at the same time | 78-week test for a self-employed person or the 39-week test for an employee. Your principal place of work determines which test applies. |
| both self-employed and an employee, but unable to satisfy the 39-week test for employees | 78-week test for self-employed persons. |
Temporary absence from work
You are considered to be self-employed on a full-time basis during any week you are temporarily absent from work because of illness, strikes, natural disasters, or similar causes.
Seasonal trade or business
If your trade or business is seasonal, the off-season weeks when no work is required or available may be counted as weeks during which you worked full time. The off-season must be less than 6 months and you must work full time before and after the off-season.
Example —
You own and operate a motel at a beach resort. The motel is closed for 5 months during the off-season. You work full time as the operator of the motel before and after the off-season. You are considered self-employed on a full-time basis during the weeks of the off-season.
Example —
Justin quit his job and moved from the east coast to the west coast to begin a full-time job as a cabinet-maker for C and L Cabinet Shop. He generally worked at the shop about 40 hours each week. Shortly after the move, Justin also began operating a cabinet-installation business from his home for several hours each afternoon and all day on weekends. Because Justin's principal place of business is the cabinet shop, he can satisfy the time test by meeting the 39-week test.
Joint Return
If you are married, file a joint return, and both you and your spouse work full-time, either of you can satisfy the full-time work test. However, you cannot add the weeks your spouse worked to the weeks you worked to satisfy that test.
Time Test Not Yet Met
You can deduct your moving expenses on your 2007 tax return even though you have not met the time test by the date your 2007 return is due. You can do this if you expect to meet the 39-week test in 2008 or the 78-week test in 2008 or 2009.
If you do not deduct your moving expenses on your 2007 return, and you later meet the time test, you can file an amended return for 2007 to take the deduction.
Failure to meet the time test
If you deduct moving expenses but do not meet the time test in 2008 or 2009, you must either:
- Report your moving expense deduction as other income on your Form 1040 for the year you cannot meet the test, or
- Use Form 1040X to amend your 2007 return, figuring your tax without the moving expense deduction.
Example —
You arrive in the general area of your new job location on September 15, 2007. You deduct your moving expenses on your 2007 return, the year of the move, even though you have not yet met the time test by the date your return is due. If you do not meet the 39-week test during the 12-month period following your arrival in the general area of your new job location, you must either:
- Report your moving expense deduction as other income on your Form 1040 for 2008, or
- Use Form 1040X to amend your 2007 return, figuring your tax without the moving expense deduction.
Exceptions to the Time Test
You do not have to meet the time test if one of the following applies.
- You are in the Armed Forces and you moved because of a permanent change of station. See Members of the Armed Forces, later.
- Your main job location was outside the United States and you moved to the United States because you retired. See Retirees or Survivors Who Move to the United States, later.
- You are the survivor of a person whose main job location at the time of death was outside the United States. See Retirees or Survivors Who Move to the United States, later.
- Your job at the new location ends because of death or disability.
- You are transferred for your employer's benefit or laid off for a reason other than willful misconduct. For this exception, you must have obtained full-time employment and you must have expected to meet the test at the time you started the job.
Figure B - Can You Deduct Expenses for a Non-Military Move within the United States?
Retirees or Survivors Who Move to the United States
If you are a retiree who was working abroad or a survivor of a decedent who was working abroad and you move to the United States or one of its possessions, you do not have to meet the time test, discussed earlier. However, you must meet the requirements discussed below under Retirees who were working abroad or Survivors of decedents who were working abroad.
If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction for that move.United States defined
For this section of this publication, the term “United States” includes the possessions of the United States.
Retirees who were working abroad
You can deduct moving expenses for a move to a new home in the United States when you permanently retire. However, both your former main job location and your former home must have been outside the United States.
Permanently retired
You are considered permanently retired when you cease gainful full-time employment or self-employment. If, at the time you retire, you intend your retirement to be permanent, you will be considered retired even though you later return to work. Your intention to retire permanently may be determined by:
- Your age and health,
- The customary retirement age for people who do similar work,
- Whether you receive retirement payments from a pension or retirement fund, and
- The length of time before you return to full-time work.
Survivors of decedents who were working abroad
If you are the spouse or the dependent of a person whose main job location at the time of death was outside the United States, you can deduct moving expenses if the following five requirements are met.
- The move is to a home in the United States.
- The move begins within 6 months after the decedent's death. (When a move begins is described below.)
- The move is from the decedent's former home.
- The decedent's former home was outside the United States.
- The decedent's former home was also your home.
When a move begins
A move begins when one of the following events occurs.
- You contract for your household goods and personal effects to be moved to your home in the United States, but only if the move is completed within a reasonable time.
- Your household goods and personal effects are packed and on the way to your home in the United States.
- You leave your former home to travel to your new home in the United States.
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.
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.
Example —
Beth's employer transferred her from Boston, Massachusetts, to Buffalo, New York. On her way to Buffalo, Beth drove into Canada to visit the Toronto Zoo. Since Beth's excursion into Canada was away from the usual Boston-Buffalo route, the expenses paid or incurred for the excursion are not deductible. Beth can only deduct what it would have cost to drive directly from Boston to Buffalo. Likewise, Beth cannot deduct any expenses, such as the cost of a hotel room, caused by the delay for sightseeing.
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 (20 cents a mile).
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.
Example —
Paul Brown is a resident of North Carolina and has been working there for the last 4 years. Because of the small size of his apartment, he stored some of his furniture in Georgia with his parents. Paul got a job in Washington, DC. It cost him $900 to move his furniture from North Carolina to Washington and $3,000 to move his furniture from Georgia to Washington. If Paul shipped his furniture in Georgia from North Carolina (his former home), it would have cost $1,800. He can deduct only $1,800 of the $3,000 he paid. The amount he can deduct for moving his furniture is $2,700 ($900 + $1,800).
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 2007, Dwaine and Robyn Black moved from Minneapolis to Washington, DC, where Dwaine was starting a new job. Dwaine drove the family car to Washington, DC, a trip of 1,100 miles. His expenses were $220 for mileage (1,100 miles x 20 cents per mile) plus $40 for tolls and $150 for lodging, for a total of $410. One week later, Robyn flew from Minneapolis to Washington, DC. Her only expense was her $400 plane ticket. The Blacks' deduction is $810 (Dwaine's $410 + 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.
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
If you live and work outside the United States, you may be able to exclude from income part or all of the income you earn in the foreign country. You may also be able to claim a foreign housing exclusion or deduction. If you claim the foreign earned income or foreign housing exclusion, you cannot deduct the part of your moving expenses that relates to the excluded income. Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, explains how to figure the part of your moving expenses that relates to excluded income. You can get the publication from most U.S. embassies and consulates, or see How To Get Tax Help at the end of this publication.
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
You cannot take a moving expense deduction and a business expense deduction for the same expenses. You must decide if your expenses are deductible as moving expenses or as business expenses. For example, expenses you have for travel, meals, and lodging while temporarily working at a place away from your regular place of work may be deductible as business expenses if you are considered away from home on business. Generally, your work at a single location is considered temporary if it is realistically expected to last (and does in fact last) for one year or less. See Publication 463, Travel, Entertainment, Gift, and Car Expenses, for information on deducting your business expenses.
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
If for all reimbursements you meet the three rules for an accountable plan (listed earlier), your employer should not include any reimbursements of expenses in your income in box 1 of your Form W-2, Wage and Tax Statement. Instead, your employer should include the reimbursements in box 12 of your Form W-2.
Example —
You lived in Boston and accepted a job in Atlanta. Under an accountable plan, your employer reimbursed you for your actual traveling expenses from Boston to Atlanta and the cost of moving your furniture to Atlanta.
Your employer will include the reimbursement in box 12 of your Form W-2. If your moving expenses are more than your reimbursement, you may be able to deduct your additional expenses (see How and When To Report, later).
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.
Example —
To get you to work in another city, your new employer reimburses you under an accountable plan for the $7,500 loss on the sale of your home. Because this is a reimbursement of a nondeductible expense, it is treated as paid under a nonaccountable plan and must be included as pay 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
If you receive a reimbursement this year for moving expenses deducted in an earlier year, and the reimbursement is not included as wages in box 1 of your Form W-2, you must include the reimbursement in income on line 21 of your Form 1040. Your employer should show the amount of your reimbursement in box 12 of your Form W-2.
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
If the reimbursements or allowances you receive are taxable, the amount of income tax your employer will withhold depends on several factors. It depends in part on whether or not income tax is withheld from your regular wages, on whether or not the reimbursements and allowances are added to your regular wages, and on any information you have given to your employer on Form W-4, Employee's Withholding Allowance Certificate. Your employer can treat your reimbursements as supplemental wages and not include the reimbursements and allowances in your regular wages. The employer can withhold income tax on supplemental wages at a flat rate which may be different from your regular tax rate.
Estimated tax
If you must make estimated tax payments, you need to take into account any taxable reimbursements and deductible moving expenses in figuring your estimated tax. For details about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax.
How and When To Report
This section explains how and when to report your moving expenses and any reimbursements or allowances you received for your move. For a quick overview, see Table 2, below.
Form 3903
Use Form 3903 to figure your moving expense deduction. Use a separate Form 3903 for each move for which you are deducting expenses.
You do not have to complete Form 3903 if all of the following apply.
- You moved to a location outside the United States in an earlier year.
- You are claiming only storage fees while you are away from the United States.
- Any amount your employer paid for the storage fees is included as wages in box 1 of your Form W-2.
Instead, enter the storage fees (after the reduction for the part that is allocable to excluded income) on line 26, Form 1040, and enter “Storage” next to the amount.
If you meet the special rules for members of the Armed Forces, see How to complete Form 3903 for members of the Armed Forces under Members of the Armed Forces, later.
Completing Form 3903
Complete Worksheet 1, earlier, or the Distance Test Worksheet in the instructions for Form 3903 to see whether you meet the distance test. If so, complete lines 1 through 3 of the form using your actual expenses (except, if you use your own car, you can figure expenses based on a standard mileage rate, instead of on actual amounts for gas and oil). Enter on line 4 the total amount of your moving expense reimbursement that was excluded from your wages. This excluded amount should be identified with code P in box 12 of Form W-2.
Expenses greater than reimbursement
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.
Expenses equal to or less than reimbursement
If line 3 is equal to or less than line 4, you have no moving expense deduction. Subtract line 3 from line 4 and, if the result is more than zero, include it as income on Form 1040, line 7.
Where to deduct
Deduct your moving expenses on line 26 of Form 1040. The amount of moving expenses you can deduct is shown on line 5 of Form 3903. You cannot deduct moving expenses on Form 1040EZ or Form 1040A.
| Table 2.Reporting Your Moving Expenses and Reimbursements |
| IF your Form W-2 shows... | AND you have... | THEN... |
|---|---|---|
| your reimbursement reported only in box 12 with code P | moving expenses greater than the amount in box 12 | file Form 3903 showing all allowable expenses* and reimbursements. |
| your reimbursement reported only in box 12 with code P | moving expenses equal to the amount in box 12 | do not file Form 3903. |
| your reimbursement divided between box 12 and box 1 | moving expenses greater than the amount in box 12 | file Form 3903 showing all allowable expenses,* but only the reimbursements reported in box 12. |
| your entire reimbursement reported as wages in box 1 | moving expenses | file Form 3903 showing all allowable expenses,* but no reimbursements. |
| no reimbursement | moving expenses | file Form 3903 showing all allowable expenses.* |
| * See Deductible Moving Expenses, earlier, for allowable expenses. |
When To Deduct Expenses
You may have a choice of when to deduct your moving expenses.
Expenses not reimbursed
If you were not reimbursed, deduct your moving expenses in the year you paid or incurred the expenses.
Example —
In December 2006, your employer transferred you to another city in the United States, where you still work. You are single and were not reimbursed for your moving expenses. In 2006, you paid for moving your furniture and deducted these expenses on your 2006 tax return. In January 2007, you paid for travel to the new city. You can deduct these additional expenses on your 2007 tax return.
Expenses reimbursed
If you are reimbursed for your expenses and you use the cash method of accounting, you can deduct your expenses either in the year you paid them or in the year you received the reimbursement. If you use the cash method of accounting, you can choose to deduct the expenses in the year you are reimbursed even though you paid the expenses in a different year. See Choosing when to deduct, next. If you deduct your expenses and you receive the reimbursement in a later year, you must include the reimbursement in your income.
Choosing when to deduct
If you use the cash method of accounting, which is used by most individuals, you can choose to deduct moving expenses in the year your employer reimburses you if:
- You paid the expenses in a year before the year of reimbursement, or
- You paid the expenses in the year immediately after the year of reimbursement but by the due date, including extensions, for filing your return for the reimbursement year.
How to make the choice
You choose to deduct moving expenses in the year you received reimbursement by taking the deduction on your return, or amended return, for that year. You cannot deduct any moving expenses for which you received a reimbursement that was not included in your income.
Illustrated Example
Tom Smith is married and has two children. He owned his home in Detroit where he worked. On February 8, his employer told him that he would be transferred to San Diego as of April 10 that year. His wife, 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 came back 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.
His records for the move show:
| 1) | Peggy's pre-move househunting trip: | ||||
| Travel and lodging | $ 449 | ||||
| Meals | 75 | $ 524 | |||
| 2) | Down payment on San Diego home | 25,000 | |||
| 3) | Real estate commission paid on sale of Detroit home | 3,500 | |||
| 4) | Loss on sale of Detroit home (not including real estate commission) | 1,500 | |||
| 5) | Amount paid for moving personal effects (furniture, other household goods, etc.) | 8,000 | |||
| 6) | Expenses of driving to San Diego: | ||||
| Mileage (Start 14,278; End 16,478) 2,200 miles at 20 cents a mile | $ 440 | ||||
| Lodging | 180 | ||||
| Meals | 320 | 940 | |||
| 7) | Cost of temporary living expenses in San Diego: | ||||
| Motel rooms | $1,450 | ||||
| Meals | 2,280 | 3,730 | |||
| Total | $43,194 | ||||
Tom was reimbursed $10,643 under an accountable plan. His employer gave him the following breakdown of the reimbursement.
| Moving personal effects | $6,800 | |
| Travel (and lodging) to San Diego | 444 | |
| Travel (and lodging) for househunting trip | 449 | |
| Lodging for temporary quarters | 1,450 | |
| Loss on sale of home | 1,500 | |
| Total reimbursement | $10,643 |
The employer included this reimbursement on Tom's Form W-2 for the year. The reimbursement of deductible expenses, $7,244 ($6,800 + $444) 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, $3,399 reimbursement of nondeductible expenses, in box 1 of Form W-2 with Tom's other wages. Tom must include this amount on line 7 of Form 1040. The employer withholds taxes from the $3,399, 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 reimbursement.
To figure his deduction for moving expenses, Tom enters the following amounts on Form 3903.
| Item 5 — moving personal effects (line 1) | $8,000 | |
| Item 6 — driving to San Diego ($440 + $180) (line 2) | 620 | |
| Total deductible moving expenses (line 3) | $8,620 | |
| Minus: Reimbursement included in box 12 of Form W-2 (line 4) | 7,244 | |
| Deduction for moving expenses (line 5) | $1,376 | |
Tom's Form 3903 and Distance Test Worksheet are shown on the next page. He also enters his deduction, $1,376, on line 26, Form 1040.
Nondeductible expenses
Of the $43,194 expenses that Tom incurred, the following items cannot be deducted.
- Item 1 — pre-move househunting expenses.
- Item 2 — the 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 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 loss on the sale of the Detroit home. The Smiths cannot deduct it even though Tom's employer reimbursed him for it.
- Item 6 — the expenses for meals while driving to San Diego. (However, the lodging and car expenses are deductible.)
- Item 7 — temporary living expenses.
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.
Services or reimbursements provided by government
Do not include in income the value of moving and storage services provided by the government because of a permanent change of station. In general, if the total reimbursements or allowances you receive from the government because of the move are more than your actual moving expenses, the government should include the excess in your wages on Form W-2. However, the excess portion of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance is not included in income and should not be included in box 1 of Form W-2. If your reimbursements or allowances are less than your actual moving expenses, do not include the reimbursements or allowances in income. You can deduct the expenses that are more than your reimbursements. See Deductible Moving Expenses, earlier.
How to complete Form 3903 for members of the Armed Forces
Take the following steps.
- 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.
- 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 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.
- 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.
