What You Need to Know About Moving and Job Hunting Expenses
If you are seeking a new job, you may incur a variety of job hunting expenses, including costs directly associated with moving to a new job location, or those specifically related to the job search. Many of these expenses are deductible, but the rules are strict, and expenses must be carefully documented and substantiated. You may be able to take advantage of these deductions if you plan carefully.
Any moving expenses you may incur, including expenses of traveling to the new location and transporting household goods and personal effects, are deductible so long as you meet certain requirements relating to when you begin work at the new position and how far the new job is from the old job and your old residence. These expenses are deductible even if you are seeking employment for the first time, or in a completely new field. Also, qualified moving expenses reimbursed or paid by your employer are considered nontaxable fringe benefits.
You also may be able to deduct the expenses you incur in searching for a new job, including the costs of a headhunter or employment service, and the expense of preparing your resume. These expenses are deductible so long as the job being sought is in the same line of work as the old job – even if you are unemployed at the time of the job search. Further, the job search does not have to be successful in order to qualify for the deduction. However, job-hunting expenses for a first job, or related to changing to a new career, are not deductible.
Considerations of whether the moving expense is tax deductible or not includible:
- Closely related to the start of work test. The move will be considered closely related to a new work location if the move is within one year of the date the taxpayer started working at the new location, and the distance from the new home to the new job location is not more than the distance from the old home to the new job location.
- Distance test. The new principal workplace must be at least 50 miles farther from the taxpayer’s old home than the old workplace. For example, if the old workplace was three miles from the old home, the new workplace must be at least 53 miles from the old home. If the taxpayer did not have an old workplace, the new workplace must be at least 50 miles from the old home. Members of the Armed Forces do not have to meet this distance test.
- Time test. 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 taxpayers must work full-time in the general area of the new workplace for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months after the move.
- Exceptions. The time test does not apply if the job ends because of disability, the employer transfers the employee, the employee was laid off for other than willful misconduct, the taxpayer is a member of the Armed Forces, the taxpayer meets certain requirements for retirees or survivors living outside the U.S., or the taxpayer is a decedent.
Eligible expenses include:
- The cost of transportation and storage (up to 30 days after the move) of household goods and personal effects.
- Travel, including lodging, from the old home to the new home. Travel is limited to one trip per person. However, each member of the household can move separately and at separate times. If the taxpayer drives his or her own vehicle, expenses can be figured either using actual out-of-pocket expenses for gas and oil (but not depreciation), or the standard mileage rate for moving (19 cents per mile for 2016), plus parking fees and tolls.
- Not deductible: Cost of meals while traveling, temporary living expenses or house-hunting expenses before or after the move are not deductible.
Please call McManamon & Co. at 440-892-8900 or send us a message if you have any questions about any of the tax issues related to moving and job hunting.
Tags: job hunting expense, moving expenses, taxes | Posted in accounting, taxes