Business owners who are moving their businesses can claim a number of deductions, although the IRS has certain requirements that must be met. It is always recommended that you check with a tax professional and the IRS to confirm your individual situation.
The cost of moving business equipment, including all computers and peripheral equipment, supplies, furniture, office equipment, inventory and parts from one business location to another may be deductible, according to tax advisers. The costs associated with buying or renting a new location may also deductible, so it’s important to keep excellent records of all your associated expenses.
If a business owner moves to a new home and that move is directly related to the move of the business, some of those costs may also be deducted. If your move is part of the process of starting a new business as a self-employed business owner, you may be eligible to deduct your personal moving costs, if you meet IRS guidelines.
Some of those requirements include: you can’t be the owner of a corporation; a part-time student, semi-retired or work only a few hours per week. Additionally, the expenses must be “directly related” to the business move and meet the IRS “distance test” and “time test.”
The “distance test” requires that the “new main job be at least 50 miles farther from your former home than your old main job location was from your former home.” So, if your former home was 5 miles from your business, the new location must be at least 55 miles away, in order to qualify for the deduction.
To meet the “time test,” you must work full-time at least 39 weeks during the first 12 months, for a total of 78 weeks in the first 24 months, to qualify for deductions for personal moving expenses, according to the IRS.
The IRS does not allow you to take a moving expenses deduction and a business expense deduction for the same expenses.
“You must decide if your expenses are deductible as moving expenses or as business expenses. For example, expenses you have for travel, meals, and lodging while temporarily working at a place away from your regular place of work may be deductible as business expenses if you are considered away from home on business.” (Internal Revenue Service)
Meals are not deductible as a moving expense unless you can provide records that they are directly associated with the business move rather than your personal moving expenses.
This information is for general information purposes. Before claiming any deductions, check with the IRS or your tax advisor at Diamond & Associates CPAs.