Tom and Peggy Smith are married and have two children. They owned a home in Detroit where Tom worked. On February 8, 2009, Tom's employer told him that he would be transferred to San Diego as of April 10 that year. Peggy flew to San Diego on March 1 to look for a new home. She put a down payment of $25,000 on a house being built and returned to Detroit on March 4. The Smiths sold their Detroit home for $1,500 less than they paid for it. They contracted to have their personal effects moved to San Diego on April 3. The family drove to San Diego where they found that their new home was not finished. They stayed in a nearby motel until the house was ready on May 1. On April 10, Tom went to work in the San Diego plant where he still works.
Their records for the move show:
|1)||Peggy's pre-move househunting |
| || |
| || Travel and lodging|| ||$ 449|| || |
| || Meals|| || 75 || ||$ 524|
|2)||Down payment on San Diego |
|3)||Real estate commission paid on |
sale of Detroit home
|4)||Loss on sale of Detroit home (not |
including real estate commission)
|5)||Amount paid for moving personal |
effects (furniture, other household
|6)||Expenses of driving to San Diego:|| || |
| ||Mileage (Start 14,278; |
2,200 miles at 24 cents a mile
| ||$ 528|| || |
| || Lodging|| ||180|| || |
| || Meals|| || 320 || ||1,028|
|7)||Cost of temporary living |
expenses in San Diego:
| || |
| || Motel rooms|| ||$1,450|| || |
| || Meals|| || 2,280 || || 3,730 |
| Total || $43,282 |
Tom was reimbursed $10,907 under an accountable plan. His employer gave him the following breakdown of the reimbursement that was allowed under the employer's plan.
|Moving personal effects|| ||$ 6,800|
|Travel (and lodging) to San Diego|| ||708|
|Travel (and lodging) for househunting trip|| ||449|
|Lodging for temporary quarters|| ||1,450|
|Loss on sale of home|| || 1,500 |
|Total reimbursement|| || $10,907 |
The employer included this reimbursement on Tom's Form W-2 for the year. The reimbursement of allowable expenses, $7,508 for moving household goods and travel to San Diego, was included in box 12 of Form W-2. His employer identified this amount with code P.
The employer included the balance, $3,399 reimbursement of nonallowable expenses, in box 1 of Form W-2 with Tom's other wages. Tom must include this amount on Form 1040, line 7. The employer withholds taxes from the $3,399, as discussed under Reimbursement for deductible and nondeductible expenses under Tax Withholding and Estimated Tax, earlier. Also, Tom's employer could have given him a separate Form W-2 for his moving expense reimbursement.
To figure his tax deduction for moving expenses, Tom enters the following amounts on Form 3903.
|Item 5 — moving personal effects (line 1)|| ||$8,000|
|Item 6 — driving to San Diego ($528 + $180) |
| || 708 |
|Total tax deductible moving expenses (line 3)|| ||$8,708|
|Minus: Reimbursement included in box 12 |
of Form W-2 (line 4)
| || 7,508 |
|Tax deduction for moving expenses (line 5)|| || $1,200 |
Tom's Form 3903 and Distance Test Worksheet are shown on page 14. He also enters his deduction, $1,200, on Form 1040, line 26.taxmap/pubs/p521-005.htm#en_us_publink1000203555
Of the $43,282 expenses that Tom and Peggy incurred, the following items totaling $34,574 ($43,282 – $8,708) cannot be deducted.
- Item 1 — pre-move househunting expenses of $524.
- Item 2 — the $25,000 down payment on the San Diego home. If any part of it were for payment of deductible taxes or interest on the mortgage on the house, that part would be deductible as an itemized deduction.
- Item 3 — the $3,500 real estate commission paid on the sale of the Detroit home. The commission is used to figure the gain or loss on the sale.
- Item 4 — the $1,500 loss on the sale of the Detroit home.
- Item 6 — the $320 expense for meals while driving to San Diego. (However, the lodging and car expenses are deductible.)
- Item 7 — temporary living expenses of $3,730.