Publication 54 |
2001 Tax Year |
Moving Expenses
If you moved to a new home in 2001 because of your job or business,
you may be able to deduct the expenses of your move. To be deductible,
the moving expenses must have been paid or incurred in connection with
starting work at a new job location.
Requirements
You may be able to deduct moving expenses if your move meets the
following requirements.
- Distance.
- Time.
- Closely related to the start of work.
Distance
The distance from your new job location to your former home must be
at least 50 miles more than the distance from your old job
location to your former home. If you did not have an old job location,
your new job location must be at least 50 miles from your former home.
Time
You must work full time for at least 39 weeks during the first
12 months after you move. If you are self-employed, you must
work full time for at least 39 weeks during the first 12 months
AND for at least 78 weeks during the first 24 months
after you move.
Retirees.
You can deduct your allowable moving expenses if you move to the
United States when you permanently retire if your principal place of
work and former home were outside the United States and its
possessions. You do not have to meet the time test. The other
requirements must be met.
Survivors.
You can deduct moving expenses for a move to a home in the United
States if you are the spouse or dependent of a person whose principal
place of work at the time of death was outside the United States and
its possessions. The move must begin within 6 months after the
decedent's death and must be from the decedent's former home outside
the United States and its possessions in which you lived with the
decedent at the time of death. You are not required to meet the time
test. The other requirements must be met.
Closely Related to
the 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.
In general, moving expenses you incur within one year from the date
you first report to work at the new location are considered closely
related in time to the start of work.
If you do not move within 1 year, 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. Their move was delayed because you allowed your child to
complete high school. You can deduct your allowable moving expenses.
Closely related in place.
A move is generally considered 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. A move that does not meet this requirement may
qualify if you can show that:
- A condition of employment requires you to live at your new
home, or
- You will spend less time or money commuting from your new
home to your new job.
Deductible Expenses
You can only deduct certain expenses.
Reasonable expenses.
You can only deduct expenses that are reasonable for the
circumstances of your move. The cost of traveling from your former
home to your new one should be by the shortest, most direct route
available by conventional transportation.
Reimbursements.
If you are reimbursed by your employer for allowable moving
expenses, these reimbursements may have been excluded from your
income. You cannot deduct moving expenses for which you were
reimbursed by your employer unless the reimbursement was included in
your income.
Deductible moving expenses.
Some of the moving expenses that you may be able to deduct include
the reasonable costs of:
- Moving household goods and personal effects (including
packing, crating, in-transit storage, and insurance) of both you and
members of your household. For foreign moves,
costs of moving household goods and personal effects include
reasonable expenses of moving the items to and from storage and
storing them while your new place of work abroad is your principal
place of work.
- Transportation and lodging for yourself and members of your
household for one trip from your former home to your new home
(including costs of getting passports).
Members of your household.
A member of your household includes 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.
Foreign moves.
A foreign move is a move in connection with the start of work at a
new job location outside the United States and its possessions. A
foreign move does not include a move back to the United States or its
possessions.
Allocation of Moving Expenses
When your new place of work is in a foreign country, your moving
expenses are directly connected with the income earned in that foreign
country. If you exclude all or part of the income that you earn at the
new location under the foreign earned income exclusion or the foreign
housing exclusion, you cannot deduct the part of your moving expense
that is allocable to the excluded income.
Also, you cannot deduct the part of the moving expense related to
the excluded income if you move from a foreign country to the United
States and all 3 of the following conditions apply.
- You are reimbursed for your move by your employer.
- You are able to treat the reimbursement as compensation for
services performed in the foreign country.
- You choose to exclude your foreign earned income.
.
The moving expense is connected with earning the income (including
reimbursements, as discussed in chapter 4 under Reimbursement of
moving expenses) either entirely in the year of the move or in 2
years. It is connected with earning the income entirely in the year of
the move if you qualify under the bona fide residence test or physical
presence test for at least 120 days during that tax year.
If you do not qualify under either the bona fide residence test or
the physical presence test for at least 120 days during the year of
the move, the expense is connected with earning the income in 2 years.
The moving expense is connected with the year of the move and the
following year if the move is from the United States to a foreign
country. The moving expense is connected with the year of the move and
the preceding year if the move is from a foreign country to the United
States.
To figure the amount of your moving expense that is allocable to
your excluded foreign earned income (and not deductible), you must
multiply your total moving expense deduction by a fraction. The
numerator (top number) of the fraction is the total of your excluded
foreign earned income and housing amounts for both years and the
denominator (bottom number) of the fraction is your total foreign
earned income for both years.
Example.
You are transferred by your employer on November 1, 2000, to
Monaco. Your tax home is in Monaco, and you qualify as a bona fide
resident of Monaco for the entire tax year 2001. In 2000 you paid
$6,000 for allowable moving expenses for your move from the United
States to Monaco. You were fully reimbursed (under a nonaccountable
plan) for these expenses in the same year. The reimbursement is
included in your income. Your only other income consists of $14,000
wages earned in 2000 after the date of your move, and $80,000 wages
earned in Monaco for 2001.
Because you did not meet the bona fide residence test for at least
120 days during 2000, the year of the move, the moving expenses are
for services you performed in both 2000 and the following year, 2001.
Your total foreign earned income for both years is $100,000,
consisting of $14,000 wages for 2000, $80,000 wages for 2001, and
$6,000 moving expense reimbursement for both years.
You exclude the maximum amount under the foreign earned income
exclusion and have no housing exclusion. The total amount you can
exclude is $90,667, consisting of the $78,000 full-year exclusion for
2001 and a $12,667 part-year exclusion for 2000 ($76,000 times the
fraction of 61 qualifying bona fide residence days over 366 total days
in the year). To find the part of your moving expenses that is not
deductible, multiply your $6,000 total expenses by the fraction
$90,667 over $100,000. The result, $5,440, is your nondeductible
amount.
You must report the full amount of the moving expense reimbursement
in the year in which you received the reimbursement. In the preceding
example, this year was 2001. You attribute the reimbursement to both
2000 and 2001 only to figure the amount of foreign earned
income eligible for exclusion for each year.
Move between foreign countries.
If you move between foreign countries, your moving expense is
allocable to income earned in the year of the move if you qualified
under either the bona fide residence test or the physical presence
test for a period that includes at least 120 days in the year of the
move.
New place of work in U.S.
If your new place of work is in the United States, the deductible
moving expenses are directly connected with the income earned in the
United States. If you treat a reimbursement from your employer as
foreign earned income (see the discussion in chapter 4), you must
allocate deductible moving expenses to foreign earned income.
Storage expenses.
These expenses are attributable to work you do during the year in
which you incur the storage expenses. You cannot deduct the amount
allocable to excluded income.
Recapture of Moving Expense Deduction
If your moving expense deduction is attributable to your foreign
earnings in 2 years (the year of the move and the following year), you
should request an extension of time to file your return for the year
of the move until after the end of the following year. By then, you
should have all the information needed to properly figure the moving
expense deduction. See Extensions under When To File
and Pay in chapter 1.
If you do not request an extension, you should figure the part of
the moving expense that you cannot deduct because it is allocable to
the foreign earned income you are excluding. You do this by
multiplying the moving expense by a fraction, the numerator (top
number) of which is your excluded foreign earned income for the year
of the move, and the denominator (bottom number) of which is your
total foreign earned income for the year of the move. Once you know
your foreign earnings and exclusion for the following year, you must
either:
- Adjust the moving expense deduction by filing an amended
return for the year of the move, or
- Recapture any additional unallowable amount as income on
your return for the following year.
If, after you make the final computation, you have an
additional amount of allowable moving expense deduction, you can claim
this only on an amended return for the year of the move. You cannot
claim it on the return for the second year.
Forms to file.
Report your moving expenses on Form 3903.
Report your moving expense deduction on
line 26 of Form 1040. If you must reduce your moving expenses by the
amount allocable to excluded income (as explained later under How
To Report Deductions), attach a statement to your return showing
how you figured this amount.
For more information about figuring moving expenses, see
Publication 521.
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