Relocating for Work Can Reduce Your Taxes

Today's tax question comes from T. Ruff in Michigan. She asks:

"I am thinking about changing jobs, the position pays 30% more but it is over 2 hours away; too far to commute. I will be putting my current home up for sale soon but in this market, it could take a while to sell. My new company will not be paying relocation or expenses (apartment or hotel in the new city). My question is this: will I be able to write off any of the expenses that I incur to live closer to the new job while I am trying to sell my home?"

Congratulations on the new job. Moving expenses are tax-deductible. To be eligible for this deduction, you need to meet both the time test and distance test.

For the time test, you must work full-time for at least 39 weeks during the 12 months following your move.

For the distance test, your new job must be located at least 50 miles farther from your old home than the distance between your old home and your old job.

If you are going to sell your home at a profit, you will be able to exclude some or all of your gains. If you owned and lived in the house for at least 24 months, you can exclude $250,000 in gains (or $500,000 if you are married). If you owned and lived in the house for less than 24 months, you can claim a pro-rated exclusion because you relocated for your job.

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