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Many taxing authorities allow for tax deductible moving expenses for individuals and businesses that are relocating for employment or business purposes. The two main types of tax deductible moving expenses are those associated with moving or storing items and those that are travel expenses incurred as a result of the move. In order for individuals and businesses to qualify for tax deductible moving expenses, they typically must meet a series of preliminary eligibility criteria, such as time and distance tests associated with the relocation.
The types of moving expenses that are considered to be tax deductible generally encompass any expenses that are reasonable under the circumstances. The taxing authority and courts in a jurisdiction generally have discretion to determine what is reasonable or unreasonable. Expenses associated with moving, such as rental costs for moving trucks, physical moving assistance and short-term storage fees are generally accepted as being reasonable. Travel expenses such as the cost of gas and lodging are also considered to be reasonable tax deductible moving expenses.
There typically are a number of restrictions that are placed on tax deductible moving expenses by the taxing authority in the jurisdiction to prevent misuse of the deduction benefits. For example, expenses related to meals, entertainment, costs associated with buying or selling a home, real estate taxes, security deposits and return trips to a former residence are usually not allowed as tax deductible moving expenses. Also, travel deductions generally apply to the most direct route from the previous address to the new address. Travel detours that are made on the way to the new destination but that are irrelevant or unnecessary to the move typically cannot be deducted as moving expenses.
Many jurisdictions impose additional restrictions and criteria that individuals and businesses must meet in order to claim tax deductible moving expenses. These restrictions typically require the move to be related to employment or a business, the location of the new job or business must be a certain distance away from the former job or business, and, in the case of individual employees, they must work at the new job or location for a certain number of hours each week. For example, in the United States, individuals and businesses can deduct moving expenses from their income taxes if they are moving more than 50 miles (80.5 km) for employment purposes and they will be working at least 39 hours per week. Additionally, businesses such as partnerships, sole proprietorships and limited liability companies that have the ability to report their business income, expenses and deductions on their taxes cannot deduct moving expenses twice; rather, they must chose whether to deduct the expenses as moving expenses or business expenses.