Moving offices is costly and the tax rules can be complex; either way, this endeavor should not be taken lightly.
While the federal government has banned moving expense deductions until 2025, New York and several other states still permit them. If you are moving offices, this could give you access to state tax breaks.
As long as they’re work-related expenses, all expenses associated with moving for work should generally be tax-deductible. This includes costs related to packing and transporting your belongings, in-transit storage space for pets being moved between addresses, connecting or disconnecting utilities at both addresses, lodging during relocation processes or travel related to it. It’s essential that detailed records of expenses such as meals and snacks be maintained so you only claim legitimate ones when filing taxes.
To qualify for this deduction from taxes, you must meet several IRS criteria. One is the time test, which requires that you work full time at your new location for at least 39 weeks in the year following your move – though this doesn’t need to be with a single employer; simply that it has been passed before you can claim moving expenses as deductions on taxes.
Distance tests require that your new job must be at least 50 miles further from home than your prior one. Proving this fact may prove more complex, so keep a mileage log to show your commute is actually longer rather than shorter; either use standard rate of 19 cents per mile or business standard mileage rate and deduct parking fees and tolls paid during move as deductions; general maintenance, car depreciation expenses cannot be deducted though.
The IRS also has rules regarding how you can claim moving expenses if they are reimbursed by your employer. If your company pays any portion or all of your moving expenses and you claim them on your taxes, be sure to include this amount in box one of your W-2 form. You cannot make double deductions; be careful only to claim expenses which have actually occurred.
There are certain expenses you cannot deduct when moving offices, such as meals and lodging costs for you and your family during transit, side trips and sightseeing, side trip costs or repairs, maintenance or insurance on personal vehicles during transit, or repairs necessary during travel.
As a self-employed entrepreneur or 1099 contractor, the IRS imposes specific guidelines in order to deduct your office relocation fees. These criteria include having your new location be at least 50 miles further from home than your old business location and working full time at it for at least one year – before any deduction can be claimed.
Companies moving their operations can deduct all expenses associated with relocation from their taxes, such as transportation costs and surveying to ensure all equipment will fit at its new home.
Under IRS guidelines, personal moving expenses can be deducted if they meet certain parameters. That means being an employee, as opposed to an entrepreneur or contractor; and being moving for job-related reasons – paying your expenses yourself rather than receiving reimbursement. (Here’s a great article that shows you how you can determine if this applies).
If you receive tax-free reimbursements during your move, those amounts still constitute taxable income and must be reported on your taxes. Please refer to this article on how to file deductions for reimbursed expenses; alternatively speak to both your employer and tax advisor to understand how these reimbursements should be reported on federal and state returns.