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Moving Expenses
 

 

Refund Your Moving Expenses

By Margaret Zai

You have just been matched to your dream residency program and the partying is about to subside. Now that you have a clear focus of where you will end up in the next 3 to 5 years, as a type-A med student, you probably have already started worrying about moving all your belongings to your new destination. Moving can be a real headache, but with a few tips, it can work to your advantage when comes tax time. Are you aware that Uncle Sam can help those who do not have their moving expenses reimbursed?  No kidding … you can get tax relief on your moving expenses, and here is how:

 

A. Eligibility:

First, to be eligible for deducting your moving expenses on your tax return, you must meet the following criteria:

  1. Timing:
  2. Generally, if you incur moving expenses within one year of the date you first reported to work at the new location, your move is considered to have taken place within a reasonable time period from the first day you started your new job. However, it is not necessary for you to arrange work before moving to a new location, as long as you actually do go to work.

    What if you do not move within one year? If you can show that you have a good reason for not moving within that time, you will still be able to deduct your allowable moving expenses.

  3. Distance:

In order to deduct your moving expense, you also have to meet the following distance test:

  1. Is the distance from your new home to the new job location shorter than the distance from your former home to the new job location? If yes, then go to (b). If no, then go to c).
  2. Is your new primary job location at least 50 miles farther from your former home than your old primary job location? For instance, if your old primary job was 3 miles from your former home, is your new primary job at least 53 miles from that former home? Note: To calculate the distance, use the shortest of the more commonly traveled routes between your (new or old) job location and your former home. If your answer to this question is Yes… then jump to 3.
  3. Don't give up yet … you can still qualify if you can show that:
  1. A condition of employment requires you to live at your new home, or
  2. You will spend less time or money commuting from your new home to your new job.

If you think that you can substantiate your reasoning, please go to (b) for your next challenge.

  1. Congratulations! You have passed both timing and distance challenges. There is one more criteria that usually no resident has difficulty to meet:

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.

However, if you start your residency late for any reason, and do not meet the time test by the date your 1999 return is due, you can still deduct your moving expense on your 1999 tax return. You can do this if you expect to meet the 39-week test in 2000 or the 78-week test in 2000 or 2001. If you deduct moving expenses but do not meet the time test by 2000 or 2001, you must either:

  1. Report your moving expense deduction as "other income" on your Form 1040 for the year you cannot meet the test, or
  2. Amend your 1999 return. (Use Form 1040X, Amended U.S. Individual Income Tax Return, to amend your return)
  3. On the other hand, if you do not deduct your moving expenses on your 1999 return, and you later meet the time test, you can file an amended return for 1999 to take the deduction.

B. Deductible moving expenses

    If you meet the requirements discussed earlier, you can deduct reasonable expenses of:

  1. Moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and
  2. Traveling (including lodging but not meals) to your new home.
  3. Remember that 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 make side trips for sightseeing, the additional expenses for your side trips cannot be deducted as moving expenses.

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

  4. Your actual expenses, such as gas and oil for your car, if you keep an accurate record of each expense, or
  5. 10 cents a mile.

You can deduct parking fees and tolls you pay in moving. However, 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 you can claim that person as a dependent.

Moves Within or to the United States

Please note that different rules apply if you are moving outside the United States rather than within the United States. Since the majority of you will fall into the later situation, I will only discuss the rules for moving within or to the United States in this article.

Form 3903. Use Form 3903 to deduct your moving expenses.

What can I deduct:

  • 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.
  • If you use your own car to move your things, see Travel by car, earlier.
  • 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.
  • You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal belongings.
  • 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 belongings from a place other than your former home. However, your deduction is limited to the amount it would have cost to move them from your former home.
  • 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 not live in your former home because your furniture had been moved.
  • You can deduct expenses for only one trip to your new home for yourself and members of your household. However, all of you do not have to travel together.

C. Nondeductible moving 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.
  • Expenses of getting 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.
  • Meal expenses.
  • Mortgage penalties.
  • Pre-move house-hunting expenses.
  • Real estate taxes.
  • Refitting of carpets and draperies.
  • Security deposits (including any given up due to the move).
  • Storage charges except those incurred in-transit and for foreign moves.
  • Temporary living expenses.
  • Cost of moving furniture you buy on the way to your new home.

D. How to report:

Use Form 3903 to report your moving expenses. Use a separate Form 3903 for each qualified move.

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.

Please note that you cannot deduct moving expenses on Form 1040EZ or Form 1040A.

When to deduct. Generally, if you were not reimbursed, deduct your allowable moving expenses either in the year you had them or in the year you paid them.

Example. In December 1999, 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 1999 you paid for moving your furniture. You deducted these expenses in 1999. In January 2000, you paid for travel to the new city. You can deduct these additional expenses in 2000.

F. Questions:

If you have any question regarding this article, please feel free send me an email.

Source: Internal Revenue Services

 

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Last Update: 02-Sep- 2014 at 06:58:00

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