International moving companies Q&A: Are moving expenses tax deductible?
If you’re a United States tax payer and are preparing to move to another country for a new job or to start a new business, you may be able to reduce the taxes you owe by deducting your international moving expenses. Here’s all the info you’ll need to determine what expenses qualify for a deduction:
Meet the move requirements
To qualify for deducting moving expenses, you must meet three specific requirements that involve:
The timing of your move
The distance of your move
Whether or not your move is closely related to the date of your work
Your move must be related to relocating for the sole purpose to start a new job or business at a new location that meets specific timeframe and distance requirements. For example, the moving expenses you incur within a year of working at your new job abroad typically are considered to be closely related to the move.
To meet the distance test, the move to your new home must exceed 50 or more miles from your previous home and your previous job, which should not be an issue if you are moving from the U.S. to any other country.
Satisfying the time test depends on whether you're self-employed or an employee. For example, you may meet the time test if you are a full-time employee who works for 39 weeks during the first year of your move.
The Internal Revenue Service’s (IRS) Publication 521 provides the details of each rule. Keep in mind that all three requirements must be met, or you may not be eligible to take the moving expense deduction. This publication is also a great resource you can use to stay current on any changes in tax laws.
Consider the foreign earned income exclusion
The United States allows you to exclude certain amounts of foreign-earned income from taxes you may owe as part of the foreign-earned income exclusion, which helps to reduce your income tax. This amount changes annually for inflation. For the 2017 tax year, you could exclude up to $102,100 of foreign earned income compared to $100,300 for the 2016 tax year. When you move outside of the United States, your moving expenses are counted towards this deduction. That means you won't be able take a deduction on moving expenses that are already covered under the foreign earned income exclusion.
Count your expenses for international movers
If you use international movers, don't forget to document your eligible moving expenses for using these companies, too. The fees international moving companies charge to help you to transport your goods abroad are travel-related expenses that can be deducted. This may include the fees charged for storage or the cost for the unpacking of your items. But not every travel-related expense is deductible. For instance, you can't deduct security deposits or plane tickets for return flights to your previous home.
Moving abroad for a new business or new job is can be an exciting experience, and one that usually will keep you busy. That’s why it’s important to take the time to determine if your international moving expenses are tax deductible. There may be exceptions to the rules and changes to the law, so it's important to stay updated and consult with a tax professional. By carefully reviewing your eligibility to deduct your international moving expenses, you may be able to reduce the amount of taxes you owe.
For more helpful information as you prepare for your move abroad, check out our simple international moving checklist.
Suddath® offers customized, flexible full-service international moving services and can provide you with a comprehensive moving quote at no charge either in-person or through our convenient virtual walkthrough that can be done using your own smartphone.