Time Limits To Moving Expense Deductions

Michael Lodge

by Michael Lodge

We get questions on moving expenses, when they are allowed or not allowed.  I found this great article by Julian Block that was published in the Accounting Web.  He is an attorney and it is good to share this article with you.  Please see the full article below.

Thee IRS might shoulder some of your expenditures for unreimbursed moving expenses if you move to take a new job or to work at a new location. Moreover, it makes no difference whether you’re going to work for the same employer or for yourself.

Job-related moving expenses are deductible only when the new job location is at least 50 miles farther from your old residence than your old job was. For instance, if the distance between your old home and your old job is 20 miles, the distance between your old home and your new job has to be a minimum of 70 miles.

Besides the distance test, a closely-related test allows expenses only for those “closely related in time to the start of work at the new location.” Translation: It’s OK for your move to take place some time after, rather than right at, the time you start your new job.

That doesn’t mean the IRS allows you an unlimited amount of time to complete the move. It does impose a deadline – generally, one year. The IRS considers your expenses to be closely related as long as you incur them within one year from the date you first report to work.

A delay beyond one year because you’re unable to sell your home is an unacceptable reason. Some acceptable reasons: The extra time allows a spouse who remains in the old job location to fulfill job commitments or to work long enough to become vested in an employer-sponsored retirement plan or to gain significantly greater benefits from it. The IRS guidelines for moving expenses authorize additional time to permit your children to finish a seg­ment of their schooling.

For example, Steve Friedman moves from Detroit to Seattle for a new job. His spouse and daughter remain in Detroit for 18 months so that the daughter can complete high school in the same school. The move to Seattle of his family and their belongings takes place more than a year after he starts work there. Their later moving expenses, though incurred considerably more than one year after his move, should be deductible, just the same as his.

When does “more than a year” become long enough to prompt the IRS to challenge the deduction? Answer: So far, the only hint is Revenue Ruling 78-200. It approved a deduction for a move delayed 30 months to allow completion of schooling.

Some taxpayers try to push things too far. The IRS refused to approve a deduction for a two-paycheck couple, both teachers, when job-related reasons caused them to postpone their move for more than a year.

The wife obtained a new teaching position that required her to commute 120 miles to another city.

The couple delayed a move closer to her job because they feared an immediate move might hurt his chances for tenure at the university where he taught. Right after he obtained tenure, they moved; his schedule made commuting more practical for him than for her. Their plight left the IRS unmoved. The couple’s circumstances, according to a 1983 ruling, didn’t prevent a within-one-year move (Ruling 8346039).

For tax help please call our office at:  877.778.1770 or send an email to:  tax@icontaxgroup.com