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.

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:

1. Your age and health,
2. The customary retirement age for people who do similar work,
3. Whether you receive retirement payments from a pension or retirement fund, and
4. 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.

1. The move is to a home in the United States.
2. The move begins within 6 months after the decedent's death. (When a move begins is described later.)
3. The move is from the decedent's former home.
4. The decedent's former home was outside the United States.
5. The decedent's former home was also your home.

When a move begins.   A move begins when one of the following events occurs.

1. 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.
2. Your household goods and personal effects are packed and on the way to your home in the United States.
3. 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:

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.

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 stop over, or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses.

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:

1. Your actual expenses, such as gas and oil for your car, if you keep an accurate record of each expense, or
2. The standard mileage rate of 13 cents a mile.

Whether you use actual expenses or the standard mileage rate to figure your expenses, you can deduct parking fees and tolls you pay in moving. 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 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 United States 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.

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 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 $300 to move his furniture from North Carolina to Washington and $1,100 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 $600. He can deduct only $600 of the $1,100 he paid. The amount he can deduct for moving his furniture is $900 ($300 + $600).

You cannot deduct the cost of moving furniture you buy on the way 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.

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 or at the same time. If you use your own car, see Travel by car, earlier.

Moves to Locations Outside the United States

To deduct expenses for a move outside the United States, you must be a United States citizen or resident alien who moves 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.

The first two items were explained earlier under Moves to Locations in the United States. The last two items are discussed below.

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 United States 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.
• 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 househunting 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.

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 expenses.

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 later) for moving expenses that you:

1. Could deduct if you had paid or incurred them, and
2. Did not deduct in an earlier year.

These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. Your employer should report these reimbursements in box 12 of Form W-2.

You cannot claim a moving expense deduction for expenses covered by these reimbursements (see Reimbursements under How To Report, later).

Expenses deducted in earlier year.   If you receive 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 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 if they are for deductible moving expenses. See Reimbursements under How To Report, later. Your employer must also 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 later) 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 combined with your regular wages, and on any information you have given to your employer on Form W-4, Employee's Withholding Allowance Certificate.

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 tax, see Publication 505, Tax Withholding and Estimated Tax.

How To Report

The following discussions explain how to report your moving expenses and any reimbursements or allowances you received for your move.

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

You do not have to complete Form 3903 if all of the following apply.

1. You moved in an earlier year.
2. You are claiming only storage fees while you are away from the United States.
3. 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 28, Form 1040, and write Storage next to the amount.

Where to deduct.   Deduct your moving expenses on line 28 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.
 

Reimbursements

This section explains what to do when you receive a reimbursement (including advances and allowances) for any of your moving expenses discussed in this publication.

If you received a reimbursement for your moving expenses, how you report this amount and your expenses depends on whether the reimbursement was paid to you under an accountable plan or a nonaccountable plan. These plans are discussed later. For a quick overview of how to report the reimbursement, see Table 2 on the next page.

Table 2. Reporting Employee Moving Expenses and Reimbursements

Your employer should tell you what method of reimbursement is used and what records they require.

Employers.   If you are an employer and you reimburse employee moving expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. Reimbursements treated as paid under an accountable plan are reported in box 12 with code P. For more information, see Publication 535, Business Expenses.

Reimbursements treated as paid under nonaccountable plans, as explained later, are reported as pay. See Publication 15, Circular E, Employer's Tax Guide, for information on employee pay.

Accountable plans.   To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules.

1. Your expenses must be of the type for which a deduction would be allowed had you paid them yourself. 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 are two examples.
2. You must adequately account to your employer for these expenses within a reasonable period of time.
3. You must return any excess reimbursement or allowance within a reasonable period of time.

An excess reimbursement includes any amount you are paid or allowed that is more than the moving expenses that you adequately accounted for to your employer. See Returning excess reimbursements, later, for information on how to handle these excess amounts.

Adequate accounting.   You adequately account by giving your employer documentary evidence of your moving expenses, along with 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. Documentary evidence includes receipts, canceled checks, and bills.

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.

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 of your situation, actions that take place within the time specified in the following list will be treated as taking place within a reasonable period of time.

1. You receive an advance within 30 days of the time you have an expense.
2. You adequately account for your expenses within 60 days after they were paid or incurred.
3. You return any excess reimbursement within 120 days after the expense was paid or incurred.
4. 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.

Employee meets accountable plan rules.   If for all reimbursements you meet the three rules for an accountable plan, your employer should not include any reimbursements of expenses in your income in box 1 of your Form W-2. 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 expenses are more than your reimbursement, show all of your expenses on lines 1 and 2 of Form 3903. Include the reimbursement on line 4 of Form 3903.

Employee does not meet accountable plan rules.   You may be reimbursed by your employer, but for part of your expenses you may not meet all three rules.

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 later).

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 received for the nondeductible expenses are 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:

1. Excess reimbursements you fail to return to your employer, and
2. 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 combine the amount of any reimbursement paid to you under a nonaccountable plan with 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. Since this is a reimbursement of a nondeductible expense, it is treated as paid under a nonaccountable plan and must be included as pay on your Form W-2.

Completing Form 3903.   Complete the Distance Test Worksheet in the instructions for Form 3903 to see whether you meet the distance test. If so, complete lines 1-3 using your actual expenses (except, if you use your own car, you can figure expenses based on a mileage rate of 13 cents a mile, 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.

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 28. This is your moving expense deduction. 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 on Form 1040, line 7.

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.

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