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 paid in moving. You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car.

Member of 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.

Location of move.   There are different rules for moving within or to the United States than for moving outside the United States. This chapter only discusses moves within or to the United States. The rules for moves outside the United States can be found in Publication 521.

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 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.

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.

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 1 year or less. See Temporary Assignment or Job in chapter 28 for information on deducting your expenses.

How To Report

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

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

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.   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.

For more information on reimbursements, see Publication 521.

When To Deduct Expenses

If you were not reimbursed, deduct your allowable moving expenses either in the year you incurred them or in the year you paid them.

Example.   In December 2001, 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 2001, you paid for moving your furniture. You deducted these expenses in 2001. In January 2002, you paid for travel to the new city. You can deduct these additional expenses in 2002.

Reimbursed expenses.   If you are reimbursed for your expenses, you may be able to deduct your allowable expenses either in the year you incurred them or in the year you paid them. If you use the cash method of accounting, you can choose to deduct the expenses in the year you are reimbursed even though you paid the expenses in a different year.

If you are reimbursed for your expenses in a year after you paid the expenses, you may want to delay taking the deduction until the year you receive the reimbursement. If you do not choose to delay your deduction until the year you are reimbursed, you must include the reimbursement in your income.

Choosing when to deduct.   If you use the cash method of accounting, which is used by most individuals, you can choose to deduct moving expenses in the year your employer reimburses you if:

1. You paid the expenses in a year before the year of reimbursement, or
2. You paid the expenses in the year immediately after the year of reimbursement but by the due date, including extensions, for filing your return for the reimbursement year.

How to make the choice.   You can choose to deduct moving expenses in the year you received reimbursement by taking the deduction on your return, or amended return, for that year.

You cannot deduct any moving expenses for which you received a reimbursement that was not included in your income. (Reimbursements are discussed in Publication 521.)

Alimony

Introduction

This chapter discusses the rules that apply if you pay or receive alimony. It covers the following topics:

• What payments are alimony,
• What payments are not alimony, such as child support,
• How to deduct alimony you paid,
• How to report alimony income you received, and
• Whether you must recapture the tax benefits of alimony. Recapture means adding back in your income all or part of a deduction you took in a prior year.

Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. It does not include voluntary payments that are not made under a divorce or separation instrument.

Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Although this chapter is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony.

To be alimony, a payment must meet certain requirements. Different requirements apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. This chapter discusses the rules for payments under instruments executed after 1984. For the rules for payments under pre-1985 instruments, see Publication 504, Divorced or Separated Individuals.

Use Table 20-1 in this chapter as a guide to determine whether certain payments are considered alimony.

Definitions.   The following definitions apply throughout this chapter.

Spouse or former spouse.   Unless otherwise stated in the following discussions about alimony, the term spouse includes former spouse.

Divorce or separation instrument.   The term divorce or separation instrument means:

1. A decree of divorce or separate maintenance or a written instrument incident to that decree,
2. A written separation agreement, or
3. A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement).

Useful Items You may want to see:

Publication

• 504   Divorced or Separated Individuals

General Rules

The following rules apply to alimony regardless of when the divorce or separation instrument was executed.

Payments not alimony.   Not all payments under a divorce or separation instrument are alimony. Alimony does not include any of the following.

1. Child support.
2. Noncash property settlements.
3. Payments that are your spouse's part of community income. (See Community Property in Publication 504.)
4. Payments to keep up the payer's property.
5. Use of property.

Payments to a third party.   Cash payments (including checks and money orders) to a third party on behalf of your spouse under the terms of your divorce or separation instrument may be alimony if they otherwise qualify. These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc.), taxes, tuition, etc. The payments are treated as received by your spouse and then paid to the third party.

Life insurance premiums.   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy.

Payments for jointly-owned home.   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony.

Mortgage payments.   If you must pay all the mortgage payments (principal and interest) on a jointly-owned home, and they otherwise qualify, you can deduct one-half of the total payments as alimony. If you itemize deductions and the home is a qualified home, you can claim half of the interest in figuring your deductible interest. Your spouse must report one-half of the payments as alimony received. If your spouse itemizes deductions and the home is a qualified home, he or she can claim one-half of the interest on the mortgage in figuring deductible interest.

Taxes and insurance.   If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct one-half of these payments as alimony. Your spouse must report one-half of these payments as alimony received. If you and your spouse itemize deductions, you can each claim one-half of the real estate taxes and none of the home insurance.

If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are alimony. But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance.

Other payments to a third party.   If you made other third-party payments, see Publication 504 to see whether any part of the payments qualifies as alimony.

Instruments Executed After 1984

The following rules for alimony apply to payments under divorce or separation instruments executed after 1984.

Exception for instruments executed before 1985.   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985.

1. A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply.
2. A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that:
   1. Changes the amount or period of payment, or
   2. Adds or deletes any contingency or condition.

For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, see Instruments Executed Before 1985 in Publication 504.

Example 1.   In November 1984, you and your former spouse executed a written separation agreement. In February 1985, a decree of divorce was substituted for the written separation agreement. The decree of divorce did not change the terms for the alimony you pay your former spouse. The decree of divorce is treated as executed before 1985. Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984.

Example 2.   Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. In this example, the decree of divorce is not treated as executed before 1985. The alimony payments are subject to the rules for payments under instruments executed after 1984.

Alimony requirements.   A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met.

1. The payment is in cash.
2. The instrument does not designate the payment as not alimony.
3. The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
4. There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
5. The payment is not treated as child support.

Each of these requirements is discussed next.

Payment must be in cash.   Only cash payments, including checks and money orders, qualify as alimony. The following do not qualify as alimony.

• Transfers of services or property (including a debt instrument of a third party or an annuity contract).
• Execution of a debt instrument by the payer.
• The use of property.

Payments to a third party.   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as a cash payment to your spouse. See Payments to a third party under General Rules, earlier.

Also, cash payments made to a third party at the written request of your spouse qualify as alimony if all the following requirements are met.

1. The payments are in lieu of payments of alimony directly to your spouse.
2. The written request states that both spouses intend the payments to be treated as alimony.
3. You receive the written request from your spouse before you file your return for the year you made the payments.

Payments designated as not alimony.   You and your spouse can designate that otherwise qualifying payments are not alimony. You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement. If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order.

Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. The copy must be attached each year the designation applies.

Spouses cannot be members of the same household.   Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. A home you formerly shared is considered one household, even if you physically separate yourselves in the home.

You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment.

Exception.   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made.

Table 20-1. Alimony Requirements (Instruments executed after 1984)

Payments ARE alimony if all of the following are true:	Payments are NOT alimony if any of the following are true:
Payments are required by a divorce or separation instrument.	Payment is designated as child support.
Payer and recipient spouse do not file a joint return.	Payment is a noncash property settlement.
Payment is in cash (including checks or money orders).	Payments are spouse's part of community income.
Payment is not designated in the instrument as not alimony.	Payments are to keep up the payer's property.
Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household.	Payments are not required by a divorce or separation instrument.
Payments are not required after death of the recipient spouse.
Payment is not designated as child support.
These payments are deductible by the payer and includible in income by the recipient.	These payments are neither deductible by the payer nor includible in income by the recipient.

Liability for payments after death of recipient spouse.   If you must continue to make payments for any period after your spouse's death, none of the payments made before or after the death are alimony.

The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law.

Example.   You must pay your former spouse $10,000 in cash each year for 10 years. Your divorce decree states that the payments will end upon your former spouse's death. You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. The death of your spouse would not terminate these payments under state law.

The $10,000 annual payments are alimony. But because the $20,000 annual payments will not end upon your former spouse's death, they are not alimony.

Substitute payments.   If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise qualifying payments, the otherwise qualifying payments are not alimony. To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that were not alimony. Whether or not such payments will be treated as not alimony depends on all the facts and circumstances.

Example 1.   Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 6 years or upon your former spouse's death, if earlier.

Your former spouse has custody of your minor children. The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. The trust income and corpus (principal) are to be used for your children's benefit.

These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. $10,000 of each of the $30,000 annual payments is not alimony.

Example 2.   Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 - $300,000).

These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. None of the annual payments are alimony. The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment.

Child support.   A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument is not alimony. The designated amount or part may vary from time to time. Child support payments are neither deductible by the payer nor taxable to the payee.

Specifically designated as child support.   A payment will be treated as specifically designated as child support to the extent that the payment is reduced either:

1. On the happening of a contingency relating to your child, or
2. At a time that can be clearly associated with the contingency.

A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support.

Contingency relating to your child.   A contingency relates to your child if it depends on any event relating to that child. It does not matter whether the event is certain or likely to occur. Events relating to your child include the child's:

• Becoming employed,
• Dying,
• Leaving the household,
• Leaving school,
• Marrying, or
• Reaching a specified age or income level.

Clearly associated with a contingency.   Payments are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations.

1. The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority.
2. The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. This certain age must be the same for each child, but need not be a whole number of years.

In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child.

Either you or the IRS can overcome the presumption in the two situations above. This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can treat the amount as alimony.

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