What Is IRS Publication 521 and How Does It Cover Moving Expenses?

IRS Publication 521 is a document for taxpayers who have incurred moving expenses related to starting work at a new location. It provides guidance on the conditions under which these expenses can be deducted from taxable income, offering potential tax savings.

Qualifications for Deductibility

To deduct moving expenses, specific qualifications must be met, including distance and time factors, as well as eligibility criteria.

Distance Factor

The distance between your new workplace and your former home must be at least 50 miles greater than the distance between your old workplace and your former home. For instance, if your previous job was 10 miles from your home, your new job must be at least 60 miles away to qualify. Accurate calculation and documentation of this distance are essential for determining eligibility.

Time Factor

Taxpayers must meet employment duration requirements. To qualify, you need to work full-time for at least 39 weeks during the first 12 months in the area of your new job. If self-employed, the requirement extends to 78 weeks in the first 24 months, with at least 39 of those weeks in the first year. Exceptions apply for disabilities, layoffs, or military service, where the time test may be waived. Detailed employment records are necessary to substantiate your claim if requested by the IRS.

Relevant Provisions

The move must be closely related to the start of work and generally occur within one year of beginning the new job. Members of the Armed Forces may be exempt from the distance and time tests if moving due to a military order. Understanding these provisions is key, as they affect the deductibility of moving expenses. Consulting the latest IRS guidelines or a tax professional can help clarify individual circumstances.

Eligible Expenses

The IRS permits deductions for certain expenses directly related to relocation, provided they meet guidelines. Transportation costs for moving household goods and personal effects are deductible, whether using a professional moving company or renting a truck. These expenses must be reasonable and necessary.

Storage fees for household goods and personal effects are deductible for up to 30 consecutive days after the items are moved from the former home and before delivery to the new home. This provision acknowledges logistical challenges during relocation and provides some financial relief.

Travel expenses for the taxpayer and household members during the move are also deductible, including transportation and lodging. However, meals are not deductible. Clearly distinguishing between deductible travel costs and non-deductible expenses is important to avoid disallowed claims or penalties.

Employer Reimbursement Handling

Employer reimbursements for moving expenses are generally considered taxable income under the Tax Cuts and Jobs Act (TCJA) of 2017. Any financial assistance or direct payments from an employer must be included in the employee’s gross income unless specific exceptions apply.

Reimbursements are typically reported on the employee’s W-2 form in box 1 as wages. This inclusion can affect the employee’s tax liability. For employers, moving expenses may still be deductible as a business expense under Section 162 of the Internal Revenue Code if they meet ordinary and necessary criteria. Employees should adjust tax planning to account for this additional taxable income.

For Armed Forces members, moving expenses reimbursed by the government due to military orders remain non-taxable under the TCJA. Keeping thorough documentation of all moving-related expenses and reimbursements is essential for accurate reporting and to substantiate claims during an IRS inquiry.

Reporting Steps

Reporting moving expenses and reimbursements on tax returns requires attention to detail. For employer reimbursements, ensure amounts are correctly reflected on your W-2 form. Address discrepancies with your employer promptly to avoid filing complications.

For active-duty military personnel, qualifying moving expenses are reported on Form 3903, which reduces taxable income. Maintaining thorough records supports accurate filing and provides reference in case of an audit.

Recordkeeping Essentials

Proper recordkeeping is critical for managing moving expenses. Retain receipts, invoices, and contracts related to moving household goods, storage fees, and lodging. For personal vehicle use, keep mileage logs and fuel receipts. If employer reimbursements are involved, save reimbursement agreements, pay stubs, and W-2 forms. These records should clearly distinguish between reimbursed and non-reimbursed expenses to avoid errors.

Digital tools can simplify recordkeeping. Scanned receipts stored in cloud-based platforms ensure accessibility and reduce the risk of loss, while expense tracking apps can categorize moving-related costs. The IRS recommends keeping records for at least three years from the date the tax return is filed. By organizing records proactively, taxpayers can navigate moving expense deductions with confidence.