When you move for work-related reasons, the Internal Revenue Service allows you to take a moving deduction. However, if you are laid off after you move, the IRS waives a requirement for the deduction, provided the layoff was not due to misconduct. Other than this waiver, taking the deduction following a layoff is no different than taking it if you continued working for your new employer.
The Time Test
Normally, in order to take the moving tax deduction, you have to work full time for at least 39 weeks during the first year after you arrive in your new location. This helps the IRS verify that your move was in fact connected to employment. However, when you are laid off for a reason other than willful misconduct, the IRS allows you to forgo the time test. The rationale is that if you made the move in good faith and worked according to your job description, you should not be prevented from taking the deduction simply because your new employer lost the ability to keep you on as an employee.
The Distance Test
Even if you can forgo the time test for the moving deduction, you still must satisfy the distance test. If you had a previous workplace, your new workplace must be 50 miles farther from your old home than your previous workplace. For instance, if you lived 10 miles from your old job, your new workplace must be at least 60 miles from where you used to live. If you didn't have a previous workplace, your new workplace must be 50 miles from your old home.
What Is Covered
In general, you can deduct all the expenses related to the physical transport of your property, you, your family members and pets. For instance, you can deduct the cost of a moving truck and packing materials. You also can deduct "in-transit" storage fees but are limited to only those fees incurred for the 30 days after your goods are picked up for transport.
What Is Not Covered
As a basic rule of thumb, items covered under the moving deduction are those related to getting from one location to the other. Thus, you cannot deduct things like the meals you eat during the move or cleaning the old property. Those items typically cannot be connected directly to the move -- you can clean and eat without actually leaving your old home, for example, so you can't prove those expenses are moving expenses.
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