| Pub. 521, Moving Expenses |
2005 Tax Year |
Publication 521 - Main Contents
Who Can Deduct Moving Expenses
You can deduct your moving expenses if you meet all three of the following requirements.
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Your move is closely related to the start of work.
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You meet the distance test.
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You meet the time test.
After you have read these rules, you may want to use Figure B
to help you decide if you can deduct your moving expenses.
Retirees, survivors, and Armed Forces members.
Different rules may apply if you are a member of the Armed Forces or a retiree or survivor moving to the United States.
These rules are discussed
later in this publication.
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.
You can generally consider moving expenses incurred within 1 year from the date you first reported to work at the
new location as closely related
in time to the start of work. It is not necessary that you arrange to work before moving to a new location, as long as you
actually go to work in that
location.
If you do not move within 1 year of the date you begin work, 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. You delayed the move for 18 months to allow your
child to complete
high school. You can deduct your moving expenses.
Closely related in place.
You can generally consider your move 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. If your move does not meet this requirement, you
may still be able to deduct
moving expenses if you can show that:
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You are required to live at your new home as a condition of your employment, or
-
You will spend less time or money commuting from your new home to your new job location.
Home defined.
Your home means your main home (residence). It can be a house, apartment, condominium, houseboat, house trailer, or
similar dwelling. It does not
include other homes owned or kept up by you or members of your family. It also does not include a seasonal home, such as a
summer beach cottage. Your
former home means your home before you left for your new job location. Your new home means your home within the area of your
new job location.
Retirees or survivors.
You may be able to deduct the expenses of moving to the United States or its possessions even though the move is not
related to the start of work
at a new job location. You must have worked outside the United States or be a survivor of someone who did. See Retirees or Survivors Who Move to
the United States, later.
Your move will meet the distance test if your new main job location is at least 50 miles farther from your former home than
your old main job
location was from your former home. For example, if your old main job location was 3 miles from your former home, your new
main job location must be
at least 53 miles from that former home. You can use Worksheet 1 to see if you meet this test.
The distance between a job location and your home is the shortest of the more commonly traveled routes between them. The distance
test considers
only the location of your former home. It does not take into account the location of your new home. See Figure A,
below.
Worksheet 1. Distance Test Keep for your Records
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Note. Members of the armed forces may not have to meet this test. See Members of the Armed Forces. |
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1.
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Enter the number of miles from your old home to your new workplace
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1.
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miles
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2.
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Enter the number of miles from your old home to your old workplace
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2.
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miles
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3.
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Subtract line 2 from line 1. If zero of less, enter -0-
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3.
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miles
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4.
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Is line 3 at least 50 miles?
□ Yes. You meet this test.
□ No. You do not meet this test. You cannot deduct your moving expenses.
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Example.
You moved to a new home less than 50 miles from your former home because you changed main job locations. Your old main job
location was 3 miles
from your former home. Your new main job location is 60 miles from that home. Because your new main job location is 57 miles
farther from your former
home than the distance from your former home to your old main job location, you meet the distance test.
First job or return to full-time work.
If you go to work full time for the first time, your place of work must be at least 50 miles from your former home
to meet the distance test.
If you go back to full-time work after a substantial period of part-time work or unemployment, your place of work
also must be at least 50 miles
from your former home.
Armed Forces.
If you are in the Armed Forces and you moved because of a permanent change of station, you do not have to meet the
distance test. See Members
of the Armed Forces, later.
Main job location.
Your main job location is usually the place where you spend most of your working time. If there is no one place where
you spend most of your
working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise
required to
“ base” your work.
Union members.
If you work for several employers on a short-term basis and you get work under a union hall system (such as a construction
or building trades
worker), your main job location is the union hall.
More than one job.
If you have more than one job at any time, your main job location depends on the facts in each case. The more important
factors to be considered
are:
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The total time you spend at each place,
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The amount of work you do at each place, and
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How much money you earn at each place.
To deduct your moving expenses, you also must meet one of the following two time tests.
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The time test for employees.
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The time test for self-employed persons.
Both of these tests are explained below. See Table 1,
below, for a summary of these tests.
You can deduct your moving expenses before you meet either of the time tests. SeeTime Test Not Yet Met, later.
If you are an employee, 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 (39-week test). Full-time employment depends on what is usual for your type of work in your area.
For purposes of this test, the following four rules apply.
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You count only your full-time work as an employee, not any work you do as a self-employed person.
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You do not have to work for the same employer for all 39 weeks.
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You do not have to work 39 weeks in a row.
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You must work full time within the same general commuting area for all 39 weeks.
Temporary absence from work.
You are considered to have worked full time during any week you are temporarily absent from work because of illness,
strikes, lockouts, layoffs,
natural disasters, or similar causes. You are also considered to have worked full time during any week you are absent from
work for leave or vacation
provided for in your work contract or agreement.
Seasonal work.
If your work is seasonal, you are considered to be working full time during the off-season only if your work contract
or agreement covers an
off-season period of less than 6 months. For example, a school teacher on a 12-month contract who teaches on a full-time basis
for more than 6 months
is considered to have worked full time for the entire 12 months.
Time Test for Self-Employed Persons
If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least
78 weeks during the
first 24 months after you arrive in the general area of your new job location (78-week test).
For purposes of the time test for self-employed persons, the following three rules apply.
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You count any full-time work you do either as an employee or as a self-employed person.
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You do not have to work for the same employer or be self-employed in the same trade or business for the 78 weeks.
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You must work within the same general commuting area for all 78 weeks.
Self-employment.
You are self-employed if you work as the sole owner of an unincorporated business or as a partner in a partnership
carrying on a business. You are
not considered self-employed if you are semi-retired, are a part-time student, or work only a few hours each week.
Full-time work.
You can count only those weeks during which you work full time as a week of work. Whether you work full time during
any week depends on what is
usual for your type of work in your area. For example, you are a self-employed dentist and maintain office hours 4 days a
week. You are considered to
perform services full time if maintaining office hours 4 days a week is not unusual for other self-employed dentists in your
area.
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Table 1.Satisfying the Time Test for Employees and Self-Employed Persons |
| IF you are... |
THEN you satisfy the time test by meeting the... |
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an employee
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39-week test for employees.
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self-employed
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78-week test for self-employed persons.
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both self-employed and an employee at the same time
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78-week test for a self-employed person or the 39-week
test for an employee. Your principal place of work
determines which test applies.
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both self-employed and an employee, but unable to satisfy the 39-week test for employees
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78-week test for self-employed persons.
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Temporary absence from work.
You are considered to be self-employed on a full-time basis during any week you are temporarily absent from work because
of illness, strikes,
natural disasters, or similar causes.
Seasonal trade or business.
If your trade or business is seasonal, the off-season weeks when no work is required or available may be counted as
weeks during which you worked
full time. The off-season must be less than 6 months and you must work full time before and after the off-season.
Example.
You own and operate a motel at a beach resort. The motel is closed for 5 months during the off-season. You work full time
as the operator of the
motel before and after the off-season. You are considered self-employed on a full-time basis during the weeks of the off-season.
If you were both an employee and self-employed, see Table 1, earlier, for the requirements.
Example.
Justin quit his job and moved from the east coast to the west coast to begin a full-time job as a cabinet-maker for C and
L Cabinet Shop. He
generally worked at the shop about 40 hours each week. Shortly after the move, Justin also began operating a cabinet-installation
business from his
home for several hours each afternoon and all day on weekends. Because Justin's principal place of business is the cabinet
shop, he can satisfy the
time test by meeting the 39-week test.
If Justin is unable to satisfy the requirements of the 39-week test during the 12-month period immediately following
his arrival in the general
location of his new principal place of work, he can satisfy the 78-week test.
If you are married, file a joint return, and both you and your spouse work full-time, either of you can satisfy the full-time
work test. However,
you cannot add the weeks your spouse worked to the weeks you worked to satisfy that test.
You can deduct your moving expenses on your 2005 tax return even though you have not met the time test by the date your 2005
return is due. You can
do this if you expect to meet the 39-week test in 2006 or the 78-week test in 2006 or 2007.
If you do not deduct your moving expenses on your 2005 return, and you later meet the time test, you can file an amended return
for 2005 to take
the deduction.
Failure to meet the time test.
If you deduct moving expenses but do not meet the time test in 2006 or 2007, you must either:
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Report your moving expense deduction as other income on your Form 1040 for the year you cannot meet the test, or
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Amend your 2005 tax return using Form 1040X.
Example.
You arrive in the general area of your new job location on September 15, 2005. You deduct your moving expenses on your 2005
return, the year of the
move, even though you have not yet met the time test by the date your return is due. If you do not meet the 39-week test during
the 12-month period
following your arrival in the general area of your new job location, you must either:
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Report as income on your 2006 return the amount you deducted as moving expenses on your 2005 return, or
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Amend your 2005 return.
Exceptions to the Time Test
You do not have to meet the time test if one of the following applies.
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You are in the Armed Forces and you moved because of a permanent change of station. See Members of the Armed Forces, later.
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Your main job location was outside the United States and you moved to the United States because you retired. See Retirees or Survivors
Who Move to the United States, later.
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You are the survivor of a person whose main job location at the time of death was outside the United States. See Retirees or Survivors
Who Move to the United States, later.
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Your job at the new location ends because of death or disability.
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You are transferred for your employer's benefit or laid off for a reason other than willful misconduct. For this exception,
you must have
obtained full-time employment and you must have expected to meet the test at the time you started the job.
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.
If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction
for that move.
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:
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Your age and health,
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The customary retirement age for people who do similar work,
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Whether you receive retirement payments from a pension or retirement fund, and
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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.
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The move is to a home in the United States.
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The move begins within 6 months after the decedent's death. (When a move begins is described below.)
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The move is from the decedent's former home.
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The decedent's former home was outside the United States.
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The decedent's former home was also your home.
When a move begins.
A move begins when one of the following events occurs.
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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.
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Your household goods and personal effects are packed and on the way to your home in the United States.
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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:
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Moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and
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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:
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Your actual expenses, such as gas and oil for your car, if you keep an accurate record of each expense, or
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The standard mileage rate (15 cents a mile from January 1 through August 31 and 22 cents a mile from September 1 through December
31,
2005).
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 U.S. 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. For purposes of moving expenses, the term “ personal effects” includes, but is not limited to, movable
personal property that the taxpayer owns and frequently uses.
If you use your own car to move your things, see Travel by car, earlier.
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 $900 to move his furniture
from North Carolina to
Washington and $3,000 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 $1,800. He can deduct only $1,800 of the $3,000 he paid. The amount he can deduct for moving his
furniture is $2,700 ($900 +
$1,800).
You cannot deduct the cost of moving furniture you buy on the way to your new home.
Storage expenses.
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.
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 move 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.
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The cost of moving household goods and personal effects from your former home to your new home.
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The cost of traveling (including lodging) from your former home to your new home.
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The cost of moving household goods and personal effects to and from storage.
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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 U.S. embassies
and consulates, or see
How To Get Tax Help at the end of this publication.
You cannot deduct the following items as moving expenses.
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Any part of the purchase price of your new home.
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Car tags.
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Driver's license.
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Expenses of buying or selling a home (including closing costs, mortgage fees, and points).
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Expenses of getting or breaking a lease.
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Home improvements to help sell your home.
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Loss on the sale of your home.
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Losses from disposing of memberships in clubs.
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Mortgage penalties.
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Pre-move househunting expenses.
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Real estate taxes.
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Refitting of carpet and draperies.
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Return trips to your former residence.
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Security deposits (including any given up due to the move.)
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Storage charges except those incurred in transit and for foreign moves.
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 business expenses.
This section explains how to report a reimbursement (including advances and allowances) on your tax return. It covers reimbursements
for any of
your moving expenses discussed in this publication. It also explains the types of reimbursements on which your employer must
withhold income tax,
social security tax, and Medicare tax.
Types of Reimbursement Plans
If you receive a reimbursement for your moving expenses, how you report this amount and your expenses depends on whether the
reimbursement is paid
to you under an accountable plan or a nonaccountable plan. For a quick overview of how to report your reimbursement and moving
expenses, see
Table 2 in the section on How and When To Report, later.
Your employer should tell you what method of reimbursement is used and what records are required.
To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules.
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Your expenses must have a business connection - that is, you must have paid or incurred deductible expenses while performing
services
as an employee of your employer. Two examples of this are 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.
-
You must adequately account to your employer for these expenses within a reasonable period of time.
-
You must return any excess reimbursement or allowance within a reasonable period of time.
Adequate accounting.
You adequately account for your moving expenses by giving your employer documentation of those expenses, such as 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. Documentation includes
receipts, canceled checks,
and bills.
Reasonable period of time.
What constitutes a “ reasonable period of time” depends on the facts and circumstances of your situation. However, regardless of those facts
and circumstances, actions that take place within the time specified in the following list will be treated as taking place
within a reasonable period
of time.
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You receive an advance within 30 days of the time you have an expense.
-
You adequately account for your expenses within 60 days after they were paid or incurred.
-
You return any excess reimbursement within 120 days after the expense was paid or incurred.
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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.
Excess reimbursement.
This includes any amount you are paid (including advances and allowances) that is more than the moving expenses that
you adequately accounted for
to your employer within a reasonable period of time. See Returning excess reimbursements, next, for information on how to handle these
excess amounts.
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.
You meet 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 moving expenses are more than your reimbursement,
you may be able
to deduct your additional expenses (see How and When To Report, later).
You do not meet accountable plan rules.
You may be reimbursed by your employer, but you may not meet all three rules for part of your expenses.
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 below).
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 you receive for the nondeductible expenses and any allowances for miscellaneous or unspecified expenses are
treated as paid under a
nonaccountable plan (see below) and are included in your income. If you are reimbursed by your employer for the taxes you
must pay (including social
security and Medicare taxes) because you have received taxable moving expense reimbursements, you must pay tax on this reimbursement
as well, and it
is treated as paid under a nonaccoutable plan.
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.
-
Excess reimbursements you fail to return to your employer.
-
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 add the amount of any reimbursement paid to you under a nonaccountable plan to 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.
Because this is a reimbursement of a nondeductible expense, it is treated as paid under a nonaccountable plan and must be
included as pay in box 1 of
your Form W-2.
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.
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 earlier) for
moving expenses that you:
-
Could deduct if you had paid or incurred them, and
-
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 reimbursements excluded from income (see Accountable Plans
under
Types of Reimbursement Plans , earlier).
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 though they are for
deductible moving expenses. See Nonaccountable Plans under Types of Reimbursement Plans, earlier. Your employer also must
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 earlier) 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 added to
your regular wages, and on any information you have given to your employer on Form W-4, Employee's Withholding Allowance Certificate.
Your employer can treat your reimbursements as supplemental wages and not include the reimbursements and allowances
in your regular wages. The
employer can withhold income tax on supplemental wages at a flat rate which may be different than your regular tax rate.
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.
This section explains how and when to report your moving expenses and any reimbursements or allowances you received for your
move. For a quick
overview, see Table 2, below.
Use Form 3903 to figure your moving expense deduction. Use a separate Form 3903 for each move for which you are deducting
expenses.
You do not have to complete Form 3903 if all of the following apply.
-
You moved to a location outside the United States in an earlier year.
-
You are claiming only storage fees while you are away from the United States.
-
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 26, Form 1040,
and enter
“Storage” next to the amount.
If you meet the special rules for members of the Armed Forces, see How to complete Form 3903 for members of the Armed Forces under
Members of the Armed Forces, later.
Completing the form.
Complete Worksheet 1, earlier, or the Distance Test Worksheet in the instructions for Form 3903 to see whether you meet the
distance test. If so, complete lines 1-3 of the form using your actual expenses (except, if you use your own car, you can
figure expenses based on a
standard mileage rate, 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.
Expenses greater than reimbursement.
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 26.
This is your moving expense
deduction.
Expenses equal to or less than reimbursement.
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 as income on Form 1040, line 7.
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.
You cannot deduct moving expenses on Form 1040EZ or Form 1040A.
|
Table 2.Reporting Your Moving Expenses and Reimbursements |
|
IF your Form W-2 shows...
|
AND you have...
|
THEN...
|
your reimbursement reported only
in box 12 with code P
|
moving expenses greater than the
amount in box 12
|
file Form 3903 showing all allowable
expenses* and reimbursements.
|
your reimbursement reported only
in box 12 with code P
|
moving expenses equal to the amount
in box 12
|
do not file Form 3903.
|
your reimbursement divided
between box 12 and box 1
|
moving expenses greater than the
amount in box 12
|
file Form 3903 showing all allowable
expenses,* but only the
reimbursements reported in box 12.
|
your entire reimbursement reported
as wages in box 1
|
moving expenses
|
file Form 3903 showing all allowable
expenses,* but no reimbursements.
|
|
no reimbursement
|
moving expenses
|
file Form 3903 showing all allowable
expenses.*
|
|
* See Deductible Moving Expenses for allowable expenses.
|
You may have a choice of when to deduct your moving expenses.
Expenses not reimbursed.
If you were not reimbursed, deduct your moving expenses in the year you paid or incurred the expenses.
Example.
In December 2004, 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 2004, you paid for moving your furniture and deducted these expenses on your 2004 tax return.
In January 2005, you paid
for travel to the new city. You can deduct these additional expenses on your 2005 tax return.
Expenses reimbursed.
If you are reimbursed for your expenses and you use the cash method of accounting, you can deduct your expenses either
in the year you paid them or
in the year you received the reimbursement. 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. See Choosing when to deduct, next.
If you deduct your expenses and you receive the reimbursement in a later year, 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:
-
You paid the expenses in a year before the year of reimbursement, or
-
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 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.
Tom Smith is married and has two children. He owned his home in Detroit where he worked. On February 8, his
employer told him that he would be transferred to San Diego as of April 10 that year. His wife, Peggy, flew to San Diego on
March 1 to look for a new
home. She put a down payment of $25,000 on a house being built and came back to Detroit on March 4. The Smiths sold their
Detroit home for $1,500 less
than they paid for it. They contracted to have their personal effects moved to San Diego on April 3. The family drove to San
Diego where they found
that their new home was not finished. They stayed in a nearby motel until the house was ready on May 1. On April 10, Tom went
to work in the San Diego
plant where he still works.
His records for the move show:
Tom was reimbursed $10,643 under an accountable plan. His employer gave him the following breakdown of the reimbursement.
The employer included this reimbursement on Tom's Form W-2 for the year. The reimbursement of deductible expenses, $7,244
($6,800 + $444) for
moving household goods and travel to San Diego, was included in box 12 of Form W-2. His employer identified this amount with
code P.
The employer included the balance, $3,399 reimbursement of nondeductible expenses, in box 1 of Form W-2 with Tom's other wages.
Tom must include
this amount on line 7 of Form 1040. The employer withholds taxes from the $3,399, as discussed under Reimbursement for deductible and
nondeductible expenses under Tax Withholding and Estimated Tax, earlier. Also, Tom's employer could have given him a separate Form
W-2 for his moving reimbursement.
To figure his deduction for moving expenses, Tom enters the following amounts on Form 3903.
Tom's Form 3903 and Distance Test Worksheet
are shown on the next page. He also enters his deduction, $1,266, on line 26, Form 1040.
Nondeductible expenses.
Of the $43,084 expenses that Tom incurred, the following items cannot be deducted.
-
Item 1 — pre-move househunting expenses.
-
Item 2 — the down payment on the San Diego home. If any part of it were for payment of deductible taxes or interest on the
mortgage on
the house, that part would be deductible as an itemized deduction.
-
Item 3 — the real estate commission paid on the sale of the Detroit home. The commission is used to figure the gain or loss
on the
sale.
-
Item 4 — the loss on the sale of the Detroit home. The Smiths cannot deduct it even though Tom's employer reimbursed him for
it.
-
Item 6 — the expenses for meals while driving to San Diego. (However, the lodging and car expenses are deductible.)
-
Item 7 — temporary living expenses.
Members of the Armed Forces
If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have
to meet the distance
and time tests, discussed earlier. You can deduct your unreimbursed moving expenses.
A permanent change of station includes:
-
A move from your home to your first post of active duty,
-
A move from one permanent post of duty to another, and
-
A move from your last post of duty to your home or to a nearer point in the United States. The move must occur within one
year of ending
your active duty or within the period allowed under the Joint Travel Regulations.
Spouse and dependents.
If a member of the Armed Forces dies, is imprisoned, or deserts, a permanent change of station for the spouse or dependent
includes a move to:
-
The place of enlistment,
-
The member's, spouse's, or dependent's home of record, or
-
A nearer point in the United States.
If the military moves you and your spouse and dependents to or from separate locations, the moves are treated as a
single move to your new main job
location.
Services or reimbursements provided by government.
Do not include in income the value of moving and storage services provided by the government because of a permanent
change of station. In general,
if the total reimbursements or allowances you receive from the government because of the move are more than your actual moving
expenses, the
government should include the excess in your wages on Form W-2. However, the excess portion of a dislocation allowance, a
temporary lodging allowance,
a temporary lodging expense, or a move-in housing allowance is not included in income and should not be included in box 1
of Form W-2.
If your reimbursements or allowances are less than your actual moving expenses, do not include the reimbursements
or allowances in income. You can
deduct the expenses that are more than your reimbursements. See Deductible Moving Expenses, earlier.
How to complete Form 3903 for members of the Armed Forces.
Take the following steps.
-
Complete lines 1-3 of the form, using your actual expenses. Do not include any expenses for moving services provided by the
government.
Also, do not include any expenses that were reimbursed by an allowance you do not have to include in your income.
-
Enter on line 4 the total reimbursements and allowances you received from the government for the expenses claimed on lines
1 and 2. Do not
include the value of moving services provided by the government. Also, do not include any part of a dislocation allowance,
a temporary lodging
allowance, a temporary lodging expense, or a move-in housing allowance.
-
Complete line 5. 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 26. This
is your moving expense deduction. If line 3 is equal to or less than line 4, you do not have a moving expense deduction. Subtract
line 3 from line 4
and, if the result is more than zero, enter it on Form 1040, line 7.
If the military moves you and your spouse and dependents to or from different locations, treat these moves as a single move.
Do not deduct any expenses for moving services provided by the government.
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information
from the IRS in several
ways. By selecting the method that is best for you, you will have quick and easy access to tax help.
Contacting your Taxpayer Advocate.
If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.
The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights
and resolving problems that
have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision,
they can clear up
problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.
To contact your Taxpayer Advocate:
-
Call the Taxpayer Advocate toll free at
1-877-777-4778.
-
Call, write, or fax the Taxpayer Advocate office in your area.
-
Call 1-800-829-4059 if you are a TTY/TDD user.
-
Visit
www.irs.gov/advocate.
For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese,
Korean, Russian, and
Vietnamese, in addition to English and Spanish).
Free tax services.
To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. It contains a list of
free tax publications and an
index of tax topics. It also describes other free tax information services, including tax education and assistance programs
and a list of TeleTax
topics.
Internet. You can access the IRS website 24 hours a day, 7 days a week, at
www.irs.gov to:
-
E-file your return. Find out about commercial tax preparation and e-file services available free to eligible
taxpayers.
-
Check the status of your 2005 refund. Click on Where's My Refund. Be sure to wait at least 6 weeks from the date you filed your
return (3 weeks if you filed electronically). Have your 2005 tax return available because you will need to know your social
security number, your
filing status, and the exact whole dollar amount of your refund.
-
Download forms, instructions, and publications.
-
Order IRS products online.
-
Research your tax questions online.
-
Search publications online by topic or keyword.
-
View Internal Revenue Bulletins (IRBs) published in the last few years.
-
Figure your withholding allowances using our Form W-4 calculator.
-
Sign up to receive local and national tax news by email.
-
Get information on starting and operating a small business.
Phone. Many services are available by phone.
-
Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current-year forms, instructions, and publications
and prior-year forms and instructions. You should receive your order within 10 days.
-
Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
-
Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An
employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local
Taxpayer Assistance Center
for an appointment. To find the number, go to
www.irs.gov/localcontacts or
look in the phone book under United States Government, Internal Revenue Service.
-
TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and
publications.
-
TeleTax topics. Call 1-800-829-4477 and press 2 to listen to pre-recorded messages covering various tax topics.
-
Refund information. If you would like to check the status of your 2005 refund, call 1-800-829-4477 and press 1 for automated
refund information or call 1-800-829-1954. Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if
you filed electronically).
Have your 2005 tax return available because you will need to know your social security number, your filing status, and the
exact whole dollar amount
of your refund.
Evaluating the quality of our telephone services. To ensure that IRS representatives give accurate, courteous, and professional answers,
we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to
sometimes listen in on or
record telephone calls. Another is to ask some callers to complete a short survey at the end of the call.
Walk-in. Many products and services are available on a walk-in basis.
-
Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and
publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions,
and office supply stores
have a collection of products available to print from a CD-ROM or photocopy from reproducible proofs. Also, some IRS offices
and libraries have the
Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
-
Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An
employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need
to resolve a tax problem,
have questions about how the tax law applies to your individual tax return, or you're more comfortable talking with someone
in person, visit your
local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No
appointment is necessary,
but if you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue.
A representative will
call you back within 2 business days to schedule an in-person appointment at your convenience. To find the number, go to
www.irs.gov/localcontacts or
look in the phone book under United States Government, Internal Revenue Service.
Mail. You can send your order for forms, instructions, and publications to the address below and receive a response within 10 business
days after your request is received.
National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903
CD-ROM for tax products. You can order Publication 1796, IRS Tax Products CD-ROM, and obtain:
-
A CD that is released twice so you have the latest products. The first release ships in late December and the final release
ships in late
February.
-
Current-year forms, instructions, and publications.
-
Prior-year forms, instructions, and publications.
-
Tax Map: an electronic research tool and finding aid.
-
Tax law frequently asked questions (FAQs).
-
Tax Topics from the IRS telephone response system.
-
Fill-in, print, and save features for most tax forms.
-
Internal Revenue Bulletins.
-
Toll-free and email technical support.
Buy the CD-ROM from National Technical Information Service (NTIS) at
www.irs.gov/cdorders for $25 (no handling fee) or call 1-877-233-6767 toll free to buy the CD-ROM for $25 (plus a $5 handling fee).
CD-ROM for small businesses. Publication 3207, The Small Business Resource Guide CD-ROM for 2005, has a new look and enhanced navigation
features. This year's CD includes:
-
Helpful information, such as how to prepare a business plan, find financing for your business, and much more.
-
All the business tax forms, instructions, and publications needed to successfully manage a business.
-
Tax law changes for 2005.
-
IRS Tax Map to help you find forms, instructions, and publications by searching on a keyword or topic.
-
Web links to various government agencies, business associations, and IRS organizations.
-
“Rate the Product” survey—your opportunity to suggest changes for future editions.
An updated version of this CD is available each year in early April. You can get a free copy by calling 1-800-829-3676 or
by visiting
www.irs.gov/smallbiz.
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