Deductible moving expenses?

Foz · Dec 29, 2003

If a self-employed trader who works from home moves at least 50 miles, can he deduct his moving expenses?

This question is only applicable for US taxpayers.

On Form 3903 there is both a time and distance test. Let's assume the trader will pass the time test by continuing to be a self-employed trader. Does he also pass the distance test? On the one hand, yes, the new "principal workplace" is at least 50 miles from the old workplace. But on the other hand, the trader didn't need to move to continue trading -- the move was for other reasons. Any ideas?

TipTopTrader · Dec 29, 2003

I did some preliminary research and did not find any specific authorities on point that addressed your exact situation of a self-employed taxpayer who moves 50+ miles for reasons unrelated to the TP's business.

The statute has several terms that come into play, including the minimum distance requirement that the new principal place of work (your new home) must be at least 50 miles further from your former residence (the old home) than was your former principal place of work (also the old home).

If one applies the statute literally, your old home was zero miles from your former principal place of work, the old home. The new principal place of work (new home) is indeed more than 50 miles farther, since 50 miles is greater than zero miles.

So I conclude you literally meet the 50 mile distance test of Sec. 217(c)(1)(A).

I'll try to do some more detailed research later, but based on a "first pass" you meet the literal requirements. I am concerned that your situation might not meet the intent of the statute, however. The general rule is that personal expenses are not deductible, and the Section 217 Moving Expenses statute is an exception to that general rule for work-related moves. In the absence of further authorities that may fall out in more extensive research, I'd say go ahead with the deduction if you are aggressive but recognize you are in a gray area that the IRS may challenge.

Foz · Dec 29, 2003

Many thanks, Joe. Yes, please let me know if you find anything additional.

Have a happy New Year!

IndexTrader · Dec 29, 2003

Also, the IRS may require that in order for you to be "self-employed", you pay social security taxes. Not sure, but you may want to find out.

condorll · Dec 29, 2003

Quote from Foz:

If a self-employed trader who works from home moves at least 50 miles, can he deduct his moving expenses?

This question is only applicable for US taxpayers.

On Form 3903 there is both a time and distance test. Let's assume the trader will pass the time test by continuing to be a self-employed trader. Does he also pass the distance test? On the one hand, yes, the new "principal workplace" is at least 50 miles from the old workplace. But on the other hand, the trader didn't need to move to continue trading -- the move was for other reasons. Any ideas?

That's quite a stretch since you are basically moving a home office.

Sam Mcgee · Dec 29, 2003

What if you moved from an area with only dial up internet access to an area with high speed access. Couldn't you use this as justification for your move?

TGregg · Dec 29, 2003

Quote from condorll:

That's quite a stretch since you are basically moving a home office.

But if you are moving your business, surely that is tax deductible.

Seriously though, I suspect this one ain't gonna fly. For whatever reason, seems like the IRS views small business deductions as 99.999% fraudulent with a tiny amount of proper deductions. But, I am far from a tax expert - I'd check with somebody with good credentials. Good credentials does not mean some dork from the local HRB office. Good credentials does mean somebody who knows about the market-to-market election w/o having to look it up.

lindq · Dec 29, 2003

Quote from Foz:

If a self-employed trader who works from home moves at least 50 miles, can he deduct his moving expenses?

This question is only applicable for US taxpayers.

On Form 3903 there is both a time and distance test. Let's assume the trader will pass the time test by continuing to be a self-employed trader. Does he also pass the distance test? On the one hand, yes, the new "principal workplace" is at least 50 miles from the old workplace. But on the other hand, the trader didn't need to move to continue trading -- the move was for other reasons. Any ideas?

If your move was for personal reasons - meaning it was not required for you professionally, or it did not improve your professional standing - a deduction will never fly. You'll just be asking for trouble.