As a result of OBRA, effective in 1994, moving expense deductions are allowed only for the reasonable costs of moving household goods and personal effects from the former residence to the new residence, and for traveling (including lodging during the period of travel but excluding meals) from the former residence to the new place of residence.(4) Under pre-1994 law, deductions(5) were allowed for the following expenses:
Because of the change, moving expense deductions will effectively become available for state tax purposes in States that begin with federal adjusted gross income in computing state taxable income.
Under pre-OBRA rules, businesses were required to include all moving expense reimbursements in the employees' gross income and to give each employee a copy of Form 4782, detailing the amount of reimbursements of moving expenses, to assist the employee in claiming moving expense deductions in respect of amounts that had been included in the employee's income.
Moving expense deductions must meet distance and employment time requirements.
Fees associated with moving personal effects into a state, such as automobile impact fees, may be deductible based on a revenue ruling which allowed as a moving expense deduction the excise tax imposed by Puerto Rico on the introduction of a second automobile into the island by a taxpayer moving there from the U.S.
The taxpayer will have a choice of using house selling expenses for the moving expense deduction or to adjust the proceeds for computation of gain or loss on the sale of the former residence.
For tax years beginning with 1994, the moving expense deduction, stripped of its indirect expenses and meal expenses disallowed after 1993, moves from an itemized deduction to a deduction for adjusted gross income (AGI).
For purposes of illustration, the reimbursement and moving expense deduction are shown separately.
Timing the Moving Expense Deduction and Reimbursement