Question

In May 2018, Regina graduated from the Naval Academy with a degree in engineering and was assigned to San Diego as a permanent duty station. In her move to San Diego, Regina incurred the following costs:

$450 in gasoline.

$250 for renting a truck from UPAYME rentals.

$100 for a tow trailer for her car.

$85 in food. $25 in double espressos from Starbucks.

$300 for motel lodging on the way to San Diego.

$405 for a previous plane trip to San Diego to look for an apartment.

$175 in temporary storage costs for her collection of crystal figurines.

a.) If the government reimburses her $900, how much, if any, may Regina take as a moving expense deduction on her 2018 tax return?

b.) Is that deduction subject to any conditions that could change its deductibility in the future?

Answer 1

Overview: If an assessee relocates to a new location due to work, then after filling IRS Form 3903, he is eligible to claim the cost of moving expenses as a deduction on his federal income tax return. However, the moving expenses paid by him are only deductible. Any expenses reimbursed by the employer are not eligible for the deduction.

Solution: a.) If the government reimburses her $900, Regina can take a moving expense deduction of the following on her 2018 tax return:

Total Eligible Moving Expense incurred = $ 1,790 ($450 in gasoline + $250 for renting a truck from UPAYME rentals + $100 for a tow trailer for her car + $85 in food + $300 for motel lodging on the way to San Diego + $405 for a previous plane trip to San Diego to look for an apartment + $175 in temporary storage costs for her collection of crystal figurines)

Total reimbursement from employer = $ 900

Net Moving expense = $ 1765 - $ 900 = $ 865

Note: Expenses such as double espressos from Starbucks are considered excessive and unreasonable to relocation. Therefore they are considered ineligible for the said deduction.

- Conclusion: If the government reimburses her $900, may Regina take $ 865 as a moving expense deduction on her 2018 tax return.

b.) Yes, the deduction is subject to the following conditions that could change its deductibility in the future:

1. IRS Form 3903 must be filled on time.

2. The timing of Regina's relocation must be near to the onset of her new employment with Naval Academy in order to qualify for tax deduction. To meet this condition, she’ll have to start her new job and work full-time for at least 39 weeks within the first 12 months after relocating.