Read §§ 82, 217, 62(a)(15), 132(a)(6), and 132(g). These provisions interlock to assure that a taxpayer does not pay income tax on certain moving expenses, as § 217 defines and limits them.
- Section 82 provides that a taxpayer who receives, directly or indirectly, payment for or reimbursement of moving expenses must include such payment in his/her gross income.
- Section 217 permits taxpayer to deduct certain expenses of moving. § 217(b). This deduction is above-the-line, i.e., it reduces taxpayer’s agi. § 62(a)(15).
- Thus taxpayer must include in his/her gross income an employer’s payment of taxpayer’s moving expenses, but paying or incurring moving expenses named in § 217(b) entitles taxpayer to a deduction. These amounts could offset.
- Of course, if an employer pays for expenses that are not included in the statutory definition of “moving expenses,” the net result is that those amounts will be included in taxpayer’s gross income as compensation income.
- If an employer does not pay for all of the expenses that are included in the statutory definition of “moving expenses,” the net result is that taxpayer may deduct these unreimbursed amounts, and these deductions will reduce his/her adjusted gross income.
- Sections 132(a)(6) and 132(g) exclude an employer’s direct or indirect payment of an individual’s moving expenses, to the extent those expenses are within § 217(b), from the individual’s gross income.
Section 217(c) establishes the rules for deductibility/excludability of moving expenses.
- Taxpayer’s new “principal place of work” must be “at least 50 miles farther from his former residence than was his former principal place of work,” § 217(c)(1)(A), OR if taxpayer had no
former principal place of work, then his/her new “principal place of work” must be at least 50 miles from his/her former residence, § 217(c)(1)(B).
- Taxpayer need not have a job in the place that s/he leaves. Moving expenses are deductible if incurred to travel to a new job or to become self-employed full-time.
- The regulations also create a “reasonable proximity” requirement concerning the new residence with respect to both time and distance. Reg. § 1.217-2(a)(3)(i).
- Moving expenses incurred within one year of the date of commencing work at the new location are presumed to be reasonably proximate. Reg. § 1.217-2(a)(3)(i).
- Generally, a taxpayer’s commute at the new location may not be longer than his/her commute at the old location. Reg. § 1.217-2(a)(3)(i).
- Taxpayer must be a full-time employee for at least 39 weeks during the 12-month period immediately following his/her arrival in the general location of his/her principal place or
work, § 217(c)(2)(A), OR during the 24 month period immediately following his/her arrival, must be a full-time employee or self-employed on a full-time basis during at least 78
weeks, not less than 39 of which are during the 12-month period immediately following arrival in the general location of his/her principal place of work, § 217(c)(2)(B).
- If a taxpayer has not fulfilled the employment requirements at the time of filing the return for the taxable year during which s/he paid or incurred moving expenses but may yet satisfy them, then taxpayer may elect to deduct them. § 217(d)(2).
- However, if taxpayer makes such an election and later fails to fulfill the employment requirements, taxpayer must recapture the amount previously deducted as gross income. § 217(d)(3).
Section 217(b) names the moving expenses that taxpayer may deduct/exclude. These include the expenses “of moving household goods and personal effects from the former residence to the new residence.” § 217(b)(1)(A). “Moving expenses” also include travel expenses, including lodging, but not meal expenses. § 217(b)(1)(B). Taxpayer may deduct as “moving expenses” the moving expenses of any member of the taxpayer’s household who has both the “former residence and the new residence as his principal place of abode.” § 217(b)(2).
Do the CALI Lesson, Basic Federal Income Taxation: Deductions: Moving Expenses