If you're planning a job-related move this fall, you'll be delighted to know that some of the costs are tax deductible. From 2012 to 2013, 35.9 million people moved, according to the U.S. Census Bureau, Current Population Survey, 2013 Annual Social and Economic Supplement. Among those who moved, 19.4% relocated to start a new job.
They may have been able to deduct many of the costs of moving when they filed their tax returns this year. Anisha Bailey, an enrolled agent and founder of Taxley, a new tax education website (www.taxley.com), says that if you're seeking advice about a tax break for a job move, your best bet is to consult an enrolled agent. "All enrolled agents specialize in taxation. All of our education is focused on tax law. We are governed by the Department of the Treasury as opposed to the individual states. We can work with clients no matter what state they live in because we have a federal license," says Bailey, who has been a tax professional since 2007 and an enrolled agent since 2012. If you opt to go the DIY route, you can also use tax software such as TurboTax.
Tax Tips for Your Next Job Move
Bailey offers some job-relocation advice:
1 You have one year to take the deduction. "First, the relocation has to be related to the start of a new job," says Bailey. "Your deductible moving expenses are generally those incurred within 12 months from the date you first report to work at your new job."
2 You must pass a "distance test." If you don't like tests, you're out of luck. "You have to meet what's called a distance test. The new job location must be at least 50 miles further from your former home than your former job location. In other words, if your former job was 10 miles from your former home, then your new job must be a minimum of 60 miles from your former residence," says Bailey.
3 You must pass the "time test." After you move, the Internal Revenue Service requires that you work at your new job full time for a minimum of 39 weeks in the first year. Business owners must work full time for a minimum of 78 weeks during the first two years at the new job location. "If a business owner doesn't meet the requirements, they'll have to amend the return in which they took the deduction or add it as income on their current year's return," says Bailey, who also notes that there are exceptions to the test.
4 Use the appropriate forms. If you're taking a moving expense deduction, use Form 3903, Moving Expenses, in addition to the...