Save By Paying Less Taxes: What You Need to Know About IRS Moving Deductions

Although moving can be quite expensive, there are many ways that you can save. In particular, those moving for work-related reasons and can prove it may be eligible for claiming IRS moving deductions on their tax form in the following year. If you were not aware of IRS moving deductions, here's what you need to know.

The Eligibility Requirements and Qualifications for Claiming IRS Moving Deductions

You can only claim IRS moving deductions if you can prove that the move is for work-related reasons. In addition, you must meet two specific requirements. They include the time test and the distance test.

To meet the time test, you must be working for a minimum of 39 weeks, or 10 months, during the first 12 months after the relocation. This is known as the 39-week test. You do not have to work consecutively for 39 weeks, and you also do not need to work for the same employer for all 39 weeks. The requirements are slightly different for those who are self-employed. Self-employed individuals must work not only 39 weeks within the first 12 months, but also 78 weeks during the first 24 months.

To meet the distance test, the new job location must be at least 50 miles farther from your old home than from the old job location. For example, if your workplace is 5 miles away from your home currently, the new job location must be at least 55 miles away from your old home.

Moving Expenses That Can Be Deducted

If you do qualify for IRS moving deductions, you must then determine which moving expenses can be deducted. It is important to keep detailed receipts to track the total cost of the move. Not all expenses can be deducted; however, some eligible expenses include:

  • costs related to packing and transporting personal items and household appliances and goods. This also includes the cost of insuring your assets. Make sure to get proper documentation from the professional movers to determine how much moving everything cost.
  • costs related to disconnecting utilities and other services because of the move. For example, if you had to pay a fee for ending your cable contract early, this fee is deductible.
  • storage expenses and moving expenses.

Documentation Needed from Professional Movers

One of the main benefits of hiring professional movers is the fact that all of the paperwork will be in order. You will need 5 pieces of documentation from the professional movers. They include the:

  • Inventory list. This clearly states what has been moved and the condition they were in. You will need the inventory list if you are claiming the cost of insurance among your moving deductions. The condition of the items will be clearly listed in the inventory list, and will provide further insight in regards to the cost of the insurance.
  • Bill of lading. This provides information regarding when everything happened. It also outlines the responsibilities of the professional movers. The bill of lading is essentially a contract between you and the movers.
  • Estimate. Although the estimate may not provide details regarding how much you actually paid, it will provide a good estimate regarding how the moving costs were calculated.
  • Receipt. The receipt provides information on how much you paid at the end for the moving services.
  • Order of service. This document is not necessarily as important as the bill of lading; however, you should file it with your tax form if you can get your hands on it. It includes information regarding the breakdown of the costs of packing and storage, as well as when the move was scheduled for.

If you plan on claiming IRS moving deductions, you may want to speak with the professional moving company ahead of time, so that they can prepare the files and documentation you'll need. Some professional movers are so experienced that they can even give you some insight on how to file for tax deductions.