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Lessons from the Tax Court: Directions for moving deductions

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in Small Business Tax,Small Business Tax Deduction Strategies

The tax law allows you to deduct job-related moving expenses as long as you meet this two-part test.

1. The new job location must be at least 50 miles farther from your old home than your old job.

2. You must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of the new job. But you don’t have to work for the same employer.

Note: Expenses that are not related to a change in jobs—for example, you’re simply upgrading or downsizing—are purely personal and nondeductible. And, as a new case shows, any deduction is limited to qualified expenses. (Palmer, TC Memo 2015-30)

Facts of the new case: Mr. Palmer lived in a cabin about 180 miles north of Minneapolis-St. Paul in 2007. He then moved back and forth from the cabin to Blaine, Minn., about 15 miles north of Minneapolis-St. Paul. During this time, he switched jobs several times. Eventually, he moved into a new house in Cass Lake in November 2008.

In August 2008, Palmer married a woman from South Carolina. She relocated to Minnesota in a series of three moves in 2008 and 2009, finally settling into the Cass Lake house in November 2009. Palmer paid $3,151, $3,322 and $3,250 for her three moves, respectively. He deducted these expenses on his joint returns for 2008 and 2009.

After unraveling all the moves for the family, the Tax Court determined that Palmer failed to meet the 50-mile test. Furthermore, the expenses incurred in moving Palmer’s wife’s belongings don’t qualify for the moving expense deduction. Palmer’s previous residence was not in South Carolina, so the cost of moving his wife’s personal effects was not deductible.

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