How can you deduct moving expenses
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Moving is expensive and it is hard to keep moving costs under control. So wouldn’t it be nice if your move would be completely tax-free? It used to be that if you moved to a new job or moved specifically to look for work, you had the right to some kind of compensation. Unfortunately, this is not quite so these days. But there are situations where you can deduct moving expenses, at least some of them.
Whether you are moving your business locally or interstate, you need to know what you can deduct and what not. For the purposes of this article, the costs of moving business with long distance moving companies NYC can be divided into two parts:
- Moving the business itself, including moving all computers and peripherals, supplies, furniture, office equipment, inventory, and parts;
- Relocation of the owners to a new home, directly related to the relocation of the business.
Business moving costs you can deduct
The cost of moving business equipment and supplies from one location to another is a deductible business expense. As are the costs of buying or renting a new location. Be sure to keep good records to justify all the costs associated with this business move with moving companies Manhattan.
Personal moving costs to start a new business
Is your move part of the process of creating a new business as an independent entrepreneur? If so, you can deduct your personal moving expenses if you meet the IRS requirements. To be classified as self-employed, you cannot be the owner of a corporation, half-retired, or a part-time student. Or work only a few hours a week. First, your personal moving costs must be directly related to your business relocation. Secondly, you must pass both of these IRS tests: “distance test” and “time test”.
- Distance test. To be able to minimize moving expenses, your new primary workplace must be at least 50 miles farther from your previous home than your old primary workplace was from your previous home.
- Time test. In order to deduct the personal costs of moving a self-employed person, you must work full time for at least 39 weeks in the first 12 months. Note that the work should be full-time, depending on what is normal for your type of business in your area. For example, most dentists work four days a week, so this will be considered full time for the deduction of moving costs.
What you cannot deduct moving expenses for
You cannot deduct moving expenses that are not directly related to moving your business. And you cannot deduct personal moving expenses that do not meet the IRS distance or time test.
IRS rules do not allow you to take a deduction of moving costs and business expenses for the same expenses. IRS says that you must decide whether your expenses are deductible as moving expenses or as business expenses.
Although it may not be easy to qualify for tax-deductible moving expenses, the deduction process is pretty simple when you know you have the right to do so. After you check everything, all you need to do to deduct moving expenses is to fill out the Form 3903, and you are good to go.