I was recently asked if moving expenses were deductible if the taxpayer is just moving within the same town. My answer was “No,” because the move doesn’t meet the distance test.

Simply put, you can’t deduct a move unless a new job would have added 50 miles or more to your daily commute from your old home. So you need to figure how far your old job was from your old home (your previous one-way commute.) Then figure how much farther you’d have had to travel to your new job if you hadn’t moved. If the difference is 50 miles or more, you can claim a deduction.

If you have never been employed before and are moving to take your first job, the new workplace must be at least 50 miles from the old home.

None of these rules apply to members of the Armed Forces. They do not have to meet this distance test.

For any move to be deductible, of course, it must be closely related to a change in the taxpayer’s job location.

The move must be connected to a new job location. Those who have retired and are relocating for non-work reasons will not be entitled to this deduction.

In addition to the distance test, a move must qualify under a time test, in terms of how long the taxpayer works at the new job.

Employees must work full time in the general area of the new workplace for at least 39 weeks during the 12 months after the move. Self-employed individuals must work full time for at least 39 weeks during the first 12 months after the move and 78 weeks during the first 24 months after the move. As in most areas of tax law, there are exceptions. The time test will not apply if the job ends because of disability, the employer transfers the employee, the employee was laid off for reasons other than willful misconduct, the taxpayer is a member of the Armed Forces, or the taxpayer has died. Certain situations for retirees or survivors living outside the U.S. can also exempt a taxpayer from the time test.

If you meet all the criteria described above, here is what you get to deduct:
 

1. The cost of transportation and storage, for up to 30 days after the move, of your household goods and personal effects.
    
2. Travel, including lodging, from the old home to the new home. Travel is limited to one trip per person. Each member of the household can move separately and at different times. The cost of driving personal cars can be figured using either the actual out-of-pocket expense for gas and oil or the standard mileage rate for moving. For 2013, that rate was 24 cents a mile plus documented parking fees and tolls.

You cannot deduct the cost of meals while traveling, temporary living expenses, or expenses for house hunting either before or after the move.

Reimbursements received from an employer will not have to be included in income if the reimbursements relate to those items that would be deductible anyway. That means that an employer’s payment for moving costs isn’t subject to taxes to begin with, so the employee can’t deduct those moving expense, either. But any expenses an employer paid that would not qualify as a deductible moving expense, such as meals during the move, will have to be included as income on the employee’s W2.

One important wrinkle is that if the 39-week or 78-week employment requirement hasn’t been met by the time the return is due – either April 15 or any due date for an extension – the expenses may still be deducted. That means, of course, that the taxpayer will still have to meet those requirements eventually. If not, that will require either an amended return, or listing the previously claimed expenses as gross income on the next year’s return.

As with anything that deals with tax deductions, it is imperative that you retain documentation about all moving costs, as well as about the number of hours worked.

Randy McIntyre is a Certified Public Accountant and a partner in McIntyre, Paradis, Wood & Company, CPAs. He has worked in public accounting since 1977, in Wilmington since 1992. His firm is built on a history of service, technical expertise, and innovative to provide the expertise of larger firms with a personal, one-on-one approach. To learn more about McIntyre, Paradis, Wood & Company, see www.mpwcpas.com. He can be reached at [email protected] or 910-793-1181.