Tax Deductible Exodus

When Moses left Egypt to lead the Hebrews to the Promised Land he met the criteria for deductible moving expenses.  There are two tests that determine whether moving expenses are deductible: a distance test and a time test.

DISTANCE TEST.  The distance test is satisfied if the distance from a taxpayer’s old residence to his new job is at least 50 miles more than the distance from the old residence to the old job.   In Moses’ case he left Goshen heading toward the Canaan – a distance of hundreds of miles (depending on the route).  Today the IRS looks for the most direct and commonly travelled route.  If your move was across town you cannot decide that the distance should be measured via a detour to the Grand Canyon.  The distance test is a strict pass or fail test.  The deduction is not allowable if the distance measured under the rules is only 49 miles.  There is no bonus if the distance measured under the rules is greater than 50 miles.

In cases where a taxpayer does not have a former job (such as a person’s first job) the distance is measured from their former residence to their new job. 

TIME TEST.  The time test for deductible moving expenses measures the amount of time a taxpayer is employed at their new job.  To qualify for deductible moving expenses a taxpayer must be employed full-time for at least 39 weeks in the twelve-month period after arriving at their new job or at least 78 weeks during the 24-month period after arriving at their new job.  Moses left his “employment” in Goshen and became a leader of the Hebrews.  While the job was certainly full time, there may be a question as to whether he received compensation.  In our time, and on our tax returns, full-time employment must include taxable compensation to qualify for the moving expense deduction.

WHEN TO DEDUCT.  Moving expenses are deductible in the year paid or incurred.  This is true even if the time test cannot be met before the tax return is due for the year in which moving expenses were paid.  When the time test has not been satisfied by the date that the tax return is due a taxpayer can elect to take the deduction in anticipation of meeting the test.   If the deduction is taken in anticipation of meeting the time test and it turns out that the taxpayer does not meet the test, the amount deducted can be included in gross income in the subsequent year or an amended tax return can be filed.  If a taxpayer is not sure whether they will meet the time test they can file their tax return without the deduction, wait until the time test has been met and file an amended return. 

HAVE A QUESTION?  If you have a question about moving expenses call the tax professionals at Seid & Company, CPAs.